Information Technology, Economic Growth, And Employment: Evidence From Time-Series Analyses

Abstract

Since the mid-1990s, numerous studies have shown the interactions between developments in Information Technology (IT) or the number of Internet subscribers and the general economy such as economic growth. Some show that development in IT has significantly affected growth, led by higher productivity, whereas others show no significant role of IT in the growth. Thus, no general consensus has been reached on the effects of IT development on economic (GDP) growth. By applying two popular time-series statistical tools (multivariate cointegration analysis and vector error correction model) with the total number of Internet subscribers in the U.S., this paper finds: (1) there is a long-run equilibrium linkage among the development of IT (subscriber numbers), economic growth, and employment; and (2) there are bi-directional Granger-causality relationships present between IT and economic growth, whereas there exists a uni-directional relationship between IT and employment in the U.S.