ICT, Output and Productivity Growth in the United Kingdom: A Sectoral Analysis

Much has been written, including in previous issues of the Monitor, on the importance of Information and Communication Technologies (ICTs) in productivity growth, but this research has focused primarily on North America. In the fourth article, Giovanni Notaro of London Economics investigates this issue for the United Kingdom using a bottom-up analysis, in which aggregate trends are derived from trends in the 11 sectors of the economy. Using a standard growth accounting framework, Notaro finds ICTs made a substantial contribution to output growth in the largest sectors of the UK economy in the 1990s, and that ICT capital is a primary driver of labour productivity growth in all UK sectors except mining and quarrying. He concludes that the weaker productivity performance of the United Kingdom relative to the United States can be attributed mainly to slower accumulation of capital, both ICTs and non-ICTs.