No. 136. EFFICIENCY IMPACT OF ICT AND THE ROLE OF PRODUCT MARKET REGULATION: SECTORAL ANALYSIS ACROSS A PANEL OF EU ECONOMIES

S. Dimelis, S. Papaioannou. 2014.

 

In this paper we explore whether the diffusion of Information and Communication Technologies (ICT) has affected technical inefficiency in manufacturing and service sectors for a number of EU economies. Also, given that in most countries significant changes were observed in the regulatory environment, which may have affected the ICT diffusion, an integrated approach is followed by incorporating the impact of Product Market Regulation (PMR) in estimating technical efficiency gains. The overall ICT effect is further elaborated by breaking it down to the effects of its components: that is computing equipment, communications’ equipment and software. A stochastic production frontier is simultaneously estimated with a technical inefficiency model, using manufacturing and service sectors data for nine EU economies in the period 1995-2005. The estimates indicate a strongly negative impact of ICT capital (in particular software and communications’ equipment) on technical inefficiency in most EU service sectors. The ICT effects remain robust after accounting for the degree of regulation through the inclusion of PMR. The impact of PMR however is not uniform and varies in size and statistical significance across sectors

 

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