UNIVERSITÄT POTSDAM - Prof. Dr. Paul JJ Welfens

the potential of ICT dynamics by taking a closer look at advanced US states and advanced
EU countries (e.g. Sweden, Finland, the UK, Ireland, Germany, France, and the
Netherlands). A serious problem in the context of such benchmarking analysis could be
that Euroland’s ICT dynamics are rather weak for reasons related to problems in telecommunications
competition (with international intra-Euroland calls being several
times more expensive than in the US – taking a look at long distance rates) or in labor
markets where a declining wage drift in several EU countries reduces the ability of expanding
firms to attract skilled labor away from declining sectors – and this in a period
in which the full exploitation of the New Economy growth effects would require accelerated
intersectoral relocation of labor. In Germany effective wage rates increased in
the period 1991-2000 by 28% while the negotiated wage rate increased by 40.9%.
These figures – based on Deutsche Bundesbank – indicate that labor market rigidity
and lack of wage drift (and wage dispersion) could be part of the relatively low ICT
dynamics in Germany and possibly in some other countries in the euro zone as well.
Recent Analysis
According to DAVERI (2001) the growth contribution differs considerably across
OECD countries (see subsequent table). Daveri also finds that in terms of the share of
IT capital (augmented by the software component), the EU faced considerable differences.
In 1999 IT capital accounted for roughly 6% of overall value-added in Sweden
and the UK, 5% in Ireland and the Netherlands, but only about 3% in Germany, Italy,
France, and Spain, with Portugal and Greece being only 2.5%. In the US the share of IT
capital in overall value-added was 8% (0.029 for hardware, 0.034 for software, and
0.016 for communications equipment) which is 1/5 of the value-added share for total
capital. In Greece, Italy, Spain, and Ireland communications equipment absorbed about
2/5 of the IT capital share of value-added. In most other EU countries the distribution
of value-added to the various IT categories was more similar to that found in the US.
The growth contribution of IT capital reached almost 1% in the US in 1991-99 –
actually increasing over time in the 1990s. Ireland, Denmark, the Netherlands and the
UK also were rather strong performers. IT capital contributed between one-half and
roughly one percentage point to overall growth in Ireland, Sweden, Finland and Ireland
in 1996-99; in the US and the UK IT capital contributed as much as 1.45 and 1.17, respectively.
As regards the US and the UK the software component seems to have been
almost as important as the hardware component. One may state the hypothesis that the
financial services sector – being relatively large in the US and the UK – plays a crucial
role for the Anglo-American lead. The US economy has shown a very high growth rate
of nominal software expenditure which rose by about 15% p.a. in the period 1992-99;
the figure for Germany was only a meager 7% p.a.; the ratio of software expenditures
to hardware expenditures was 1.44 for the US in 1995 while Germany had a ratio of
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