The Effect of Human Capital on Output Growth in ICT Industries: Evidence from OECD Countries. ESRI WP184. March 2007

In this paper we analyse the effects of human capital in fostering output growth in ICT industries using data from a sample of twenty OECD countries over the period 1980-2002. We focus on within country between industry differences and estimate a system of simultaneous equations to account for simultaneous effects of human capital on physical investment and output growth. The results of our econometric analysis suggest that countries with a high human capital stock and high human capital improvement experienced faster output growth in ICT industries. Furthermore, we find that past country level educational attainment reflected in the human capital stock and human capital accumulation over the analysed period had a direct positive and significant effect on physical capital investment. In addition, we found that in countries with an ex-ante high human capital stock and in countries with high human capital accumulation, ICT producing manufacturing and ICT using services grew relatively faster.