The Effects Of Information Communication Technology (ICT)Investment On Regional Economic Growth

In China, the development of ICT (Information Communication Technology) investment has been continuously changing the regional economic structure and the method of production. However, whether or not ICT investment has a positive correlation with regional economic performance remains unclear. This thesis builds an empirical model based on the Cobb-Douglas production function and Solow-Swan growth model to examine the relationship between ICT investment and regional economic growth within China. I use the provincial panel data with a sample of31provinces in mainland China from2001to2008. The following facts are confirmed through the empirical test:(1) In general, ICT investment in China has not had a significant correlation with GDP growth, but it has had positive effects on productivity improvement;(2) In eastern and central China, ICT investment has significant positive effects on economic performance, especially on the productivity side;(3) In western China, no positive correlation between ICT investment and GDP growth has been proven, and even in some cases, ICT investment has negative effects on economic growth;(4) Non-ICT investment and labor still account for most of the economic development in China, and non-ICT investment is the main driving force for the Chinese economy.Based on the previous empirical facts, three policy recommendations are offered:(1) Though ICT investment has much lower nominal output elasticity than non-ICT investment, its contribution to MFP (Multifactor Productivity) is significant but un-measureable through the spillover effects, externality effects and coordination effect, which are proved to be key for long-term economic development (according to the case of developed economies in1990s). Therefore, the Chinese central government should insist on its favorable polices for ICT industries and accelerate its economic structural transformation;(2) Central and eastern provinces can rely on ICT industries to develop their economies, more favorable policies and regulations should be implemented to attract skilled professionals, as well as capital investment;(3) In western China, ICT investment should be carried out "wisely". More investment ought to firstly come into ICT economic environmental sectors, such infrastructure, education, intellectual property protection, etc. Not until the region achieves sufficient capital stock and adequate economic environmental conditions can ICT investment start to benefit the economy.