Working Paper No. 551

Is Human Capital the Key to the IT Productivity Paradox?

Published: February 27, 2001 Pages: 48Keywords: IT-Human Capital Complementarity; New Growth Theory; Applied EconometricsJEL-codes: J24; D24; L60

Is Human Capital the Key to the IT Productivity Paradox? Gudmundur Gunnarsson, Erik Mellander and Eleni Savvidou


Unlike previous analyses, we consider (i) that IT may affect productivity growth both directly and indirectly, through human capital interactions, and (ii) possible externalities in the use of IT. Examining, hypothetically, the statistical consequences of erroneously disregarding (i) and (ii) we shed light on the small or negative growth effects found in early U.S. studies, as well as the positive impacts reported recently. Our empirical analysis uses a 14-industry panel for Swedish manufacturing 1986-95. We find that human capital developments made the average effect of IT essentially zero in 1986 and steadily increasing thereafter, and, also, generated large differences in growth effects across industries.

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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