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The economic impact of information and communications technology (ICT) investment is visible only with a long time-lag, particularly in the case of employment. There are two contrasting effects of ICT investment on employment: the complementarity relationships between capital and higher skills and the substitutability relationships between capital and lower skills and between the ICT capital intensity and wage rate of unskilled workers. The purpose of this paper is to provide empirical evidence on the impact of the skill-biased technical change associated with ICT investment on labor demand in Japan and Korea. Our estimates of the effect of ICT intensity on the wage share based on Japanese and Korean data are generally consistent with the estimates obtained by O'Mahony et al. (2008) in the sense that we find capital-skill complementarity and technology-skill substitutability during the period 1995–2015.

Brynjolfsson, Rock, and Syverson (2021) argued that the standard TFP growth is low during an investment boom for new technology such as the IT revolution. As the new capital is operated and productivity improves, the shape of the movements in the standard productivity growth resembles a J-curve. However, when costs associated with investment for new technology are recognized as intangible investment - which is not counted in the conventional value added –, the revised TFP growth including these unmeasured intangibles show different movements from the standard TFP growth. Following Brynjolfsson, Rock, and Syverson (2021), we examine the gap between the standard TFP growth and the revised TFP growth. According to their theory, unmeasured intangibles are estimated by the gap between the shadow value and the price of investment goods. We obtain this shadow value of investment through an estimated parameter in each asset using listed firm-level data and revise the standard TFP growth rate. In the case of all industries, the standard TFP growth is overestimated in most years in the late 1990s and the 2000s, because the growth in intangible investment associated with measured investment is lower than measured capital accumulation rate. When we focus on the IT-intensive industries, we find the productivity J-curve in the late 1990s, at the early stage of the IT revolution, as indicated by Brynjolfsson, Rock and Syverson (2021).

The Great East-Japan Earthquake of March 11th, 2011 had a serious negative economic impact on the Japanese economy. The earthquake substantially reduced production not only in regions directly hit by the earthquake but also in other parts of Japan through supply chain disruptions. We examine the economic impact of the supply chain disruptions immediately following the earthquake using a unique interregional input-output table combining two different regional IO tables, the JIP database, and other regional statistics. To conduct our analysis, we modify the forward linkage methodology to take into account the bottleneck effect in the intermediate input of manufacturing production. Our estimates show that the production losses caused by the supply chain disruptions would amount to at least 0.35% of the country’s GDP. We also analyzed how establishing multiple supply chains would work to mitigate the damage of potential natural disasters in the future. However, as multiple supply chains may lose production efficiency at the firm level, we would require policies that provide incentives to firms that diversify supply chains.

Since the collapse of the bubble economy, economic growth rates in Japan have slowed down as a result of low capital accumulation. We focus on the low rate of return on capital, which led to this slow capital accumulation. Using Japanese KLEMS (JIP) database, we find that the increase in the capital/output ratio and low capital share led to the low rate of return on capital. Not only has the rate of return on capital declined, but also its variance has grown and the number of industries with negative rates of return has increased. Then, we estimate a modified factor price frontier model using industry-level data. In our estimations, the profit rate is explained not only by the real wage but also by intangible investments. Estimation results show that investment in IT and human resources leads to an increase in the profit rate. However, the complementary effects between research and development (R&D) capital and tangible capital are indefinite as suggested by Chun et al. (2015 14 ). Our study implies that the government should undertake a comprehensive innovation policy including improvements in IT and human resources and organizational structure as well as R&D investments to revitalize capital formation in Japan.

In estimating intangible investment in Japan at the industry level, we find a high intangible investment/gross value added ratio in the information technology (IT) sector and negative growth rates in intangible capital in 13 industries over the decade from 2000. When we examine the impacts of intangible investment on total factor productivity growth, we find a significant and positive effect on total factor productivity growth in the market economy. In a revised estimation that considers intertemporal knowledge spillovers, the estimated rate of return on intangibles in the IT sector is quite high after the IT revolution. The results imply that intangible assets have been underinvested in the IT sector.

Following Bernard, Redding and Schott (2010), we have constructed product and firm level data on Japanese manufacturing firms using the Census of Manufacturers. Our empirical analysis based on the constructed data shows that multiple-product firms perform better than single-product firms and their labor productivity growth rates are higher. Empirical studies at the industry level show that an unregulated, competitive environment stimulates product switching. At the firm level, product switching behavior improves firm performance, including employment, while the firms that reduce the number of their products see a decline in labor productivity, due to output reduction exceeding the magnitude of the reduction in employment.

We measure intangible investment by industry in Japan based upon the JIP (Japan Industrial Productivity) database and other primary statistics. Expenditures on intangibles in Japan amounted to around 43 trillion yen, accounting for around 9% of GDP in the 2000s. The ratio of intangible investment to gross value added in the IT sector was higher than that in the non-IT sector. The total intangible capital stock in 2008 was worth 136 trillion yen, but the growth rate of intangible capital turned negative in some industries in the 2000s, as they underwent a drastic restructuring process. Growth accounting including intangible assets shows that intangible assets in the IT sector, which has led Japanese economic growth, are contributing to the growth of the economy. Our above results suggest that we should not unnecessarily cling to economic policy based on existing industry classifications, but draw up growth-promoting policies based upon new industry classifications.

Chun, Hyunbae; Miyagawa, Tsutomu; Pyo, Hak Kil et al..May, 2015.Do intangibles contribute to productivity growth in East Asian countries?,Reports,[Tokyo]The Research Institute of Economy, Trade and Industry,RIETI Discussion Paper Series/15-E-055

In this paper we examine empirically the effect of market competition on firm productivity improvements using data drawn from the Japanese manufacturing sector. We find that a non-linear relationship between competition and productivity growth induced by R&D activity as suggested by Aghion et al. (2005) holds for Japanese manufacturing firms. We also show that greater market competition widens technology differences across firms, and firms facing more intense competition are more productive than other firms. Our empirical results imply that productivity improvement through R&D activity depends on not only a competitive environment but also technological differences between firms.

Following the approach of Corrado, Hulten, and Sichel (2005, 2006), we measure intangible investment and examine the contribution of intangible capital to economic growth in Japan. We find that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.1 percent, which is lower than the ratio estimated for the U.S. in the early 2000s. The ratio of intangible to tangible investment in Japan is also lower than equivalent values estimated for the U.S. In addition, we find that, in stark contrast to the U.S., where intangible capital grew rapidly in the late 1990s, the growth rate of intangible capital in Japan declined from the late 1980s to the early 2000s. Our conclusions regarding intangible investment in Japan remain largely unchanged even if, using data with respect to firm-specific resources, we take on-the-job training into account.

Introduction.- Intangibles and value creation at the industrial level: Delineating their complementarities.- Intangible Assets and Investments at the Sector Level - Empirical Evidence for Germany.- Does the Stock Market Evaluate Intangible Assets? An Empirical Analysis Using Data of listed Firms in Japan.- Financial Constraints on Intangible Investments: Evidence from Japanese Firms.- Has the Management Quality in Korean Firms Caught up with That in Japanese Firms? An Empirical Study Using Interview Surveys.- How does the market value management practices of Japanese firms? Using management practice survey data.- Intangible Assets and the Theory of the Firm.- Resource Reallocation and Innovation: Converting Enterprise Risks into Opportunities.- Innovation in Information Systems and Valuation of Intangibles.

In order to investigate the impacts of technology shocks on the recent Japanese business cycles, we construct an aggregate technological measure from industry-based data. Our approach is to estimate production function by industry, by controlling for the returns to scale factor and unobserved factor utilization. We find that positive technology shocks result in a contraction of labor input on impact. This result implies that the standard real business cycle (RBC) model is not supported and the new Keynesian model or the labor reallocation model is a candidate to explain the Japanese business cycles. From further empirical studies, we find that the labor reallocation model is plausible for explaining the Japanese business cycles.

Constructing a database of 37 industries, we examine whether the measured productivity in Japan is pro-cyclical and investigate the sources of this pro-cyclicality by using the production function approach employed by Hall (1990) and Basu and Fernald (1995). The aggregate Solow residual displays pro-cyclicality. A large number of industries show constant returns to scale. No significant evidence for the presence of thick-market externalities is found. Our results also hold when we consider labour hoarding, part-time employment, and the adjustment cost of investment. The results indicate that policies to revitalize the Japanese economy should concentrate on promoting productivity growth.

The objective of this paper is to examine the contribution of IT investment to productivity growth in Japan. To this end, we first construct a panel data set of value added, labor inputs, IT investment, IT capital stock, and non-IT capital stock in 22 industries (including 13 manufacturing industries) from 1980–2000. We then decompose labor productivity into four terms and find that the recent slowdown in productivity is caused by the absence of a reallocation effect of labor. Further, we estimate TFP growth functions and labor productivity functions, examining network externalities of IT capital. We find that TFP growth in the 1990s is affected by positive inter-industry spillover effects from the supply side. J. Japanese Int. Economies 18 (3) (2004) 362–389.

This paper investigates the effects of the ownership structure on the R&D intensity. Using the Japanese machine-manufacturing firm data from 1987 till 1998, we first found that the effects of R&D on stock market valuation and TFP growth were significantly positive in the latter half of the 1990s. Next, analyzing the determinants of the R&D intensity in 1998, we found that the shareholding ratios of large shareholders and the leverage ratios were positively correlated with R&D intensity, while the proportion of bank loans to total debt was negatively correlated with it. These results are consistent with the hypotheses that stress the disciplinary roles of large shareholders and debt. It is also consistent with a bank's holdup hypothesis. Finally, comparing the results of 1998 with those of 1989, we found that the positive roles of keiretsu affiliation and cross-shareholdings disappeared during the last decade.

1. Overview of the JIP Database To measure total factor productivity (TFP) of the Japanese economy by industry, we created a database that we are calling the Japan Industry Productivity (JIP) database. The database contains annual information on 84 sectors, including 49 non-manufacturing sectors, from 1970 to 1998. It includes detailed information on factor inputs, annual input-output tables, relatively reliable deflators, and some additional data, such as R&D stock, and Japan's trade data by trade partner, etc., at a detailed sectoral level. 2. Estimate of TFP Growth of the Japanese Economy Labor quality is not taken into consideration in estimating TFP growth rates in many previous studies. When we estimate the TFP growth rate of the Japanese economy for the period of 1970-98 by taking it into consideration, we find that the TFP growth rate in consideration of labor quality was lower than that in no consideration of it. This implies that accumulation of human capital through school education and aging after 1970 contributed to improvements in labor productivity.When we take capacity utilization into consideration, we find that we tend to underestimate TFP for the periods of recession. Still, we can say that the TFP growth rates in the 1990s were lower than those before. 3. Estimate of TFP Growth By Sector When we compare TFP growth rates in service sectors and non-service ones, we find that those in non-service sectors were relatively high before the 1990s, while TFP growth rates in service sectors were relatively low before the 1990s. However, a new trend can be found in the 1990s. It should be noted that TFP growth rates in some of service sectors where deregulation was accelerated in the 1990s were getting higher. 4. Estimate of Software Investment In National Accounts of Japan, only order-made software investment is estimated. We estimate in-house software and general application software as well as order-made software. Our estimation suggests that Japan's official statistics underestimate software investment. The huge gap in software investment between the U.S. and Japanese official statistics vanishes when we take account of in-house software and general application software.

Following Corrado et al. (Review of Income and Wealth 55:658–660, 2009), we measure intangible assets at the listed firm level in Japan. Compared to the conventional Tobin’s Q, the revised Q including intangibles is almost 1 on average, as suggested by Hall (Brookings Papers on Economic Activity 1:73–118, 2000 and American Economic Review 91:1185–1202, 2001). The standard deviation of the revised Q is smaller than that of the conventional Q. Estimation results based on Bond and Cummins (Brookings Papers on Economic Activity 1:61–124, 2000) show that greater intangible assets increase firm value. In particular, in the IT industries, on average Tobin’s Q is higher than that in the non-IT industries, and the stock market reflects the value of intangibles in the IT industries. These results suggest that the government should adopt policies that promote investment, including intangibles in the IT industries, and change in industry structure in Japan.

Bloom and Van Reenen (Quarterly Journal of Economics 122:1351–1408, 2007) show that differences in management practices are related to productivity differences at the firm level. In this paper we conducted a similar interview surveys on management practices in Japanese and Korean firms in 2008 and 2012. We find that overall management scores as an average of organizational and human resource management scores in Japan are higher than those in Korea. However, the second survey shows that the gap in management scores between two countries has shrunken over time. In addition, average management quality in Korean large firms has surpassed that in Japanese large firms, which are consistent with the literature comparing big businesses in Korea and Japan. This study also compares additional aspects of the management style, such as speed in decision-making and the role of various communication channels, which are not done in the previous literatures.

Fukao, Kyoji; Miyagawa, Tsutomu; Pyo, Hak K. et al..March, 2011.Estimates of total factor productivity, the contribution of ICT, and resource reallocation effects in Japan and Korea,Report,TokyoHitotsubashi University,Global COE Hi-Stat Discussion Paper Series/177,41

The Japanese economy has stagnated since the economic bubble collapsed in 1990. The paper points out two reasons for the long-term stagnation of the Japanese economy: the slow growth in capital accumulation including ICT assets and the decline of entrepreneurship. In the advanced countries, intangible assets play a crucial role in the growth at the aggregate and firm levels. To revitalize the Japanese economy, we need policies which promote accumulation in intangible assets.

The effects of humidity on the mechanical behavior of polyamide-6 (PA) and cellulose-acetate (CA) were investigated. The specimens were exposed in a chamber at constant temperature and humidity for 4∼16 days, and measurements were made on the variations of weight and tensile properties. In addition infrared analysis was conducted using the attenuated total reflectance attachment with a KRS-5 prism. The result are as follows : ( 1 ) In PA, there exists a linear relationship between the weight change and the maximum stress ; i. e. it becomes heavier and more ductile when it is exposed to high humidity and temperature. The main factor of the weight change is moisture absorption and/or desiccation, and this relationship also holds for the specimens under dry-wet cyclic exposure. ( 2 ) The variation of yield stress of CA is correlated well with its weight change but not with the exposed humidity. IR spectroscopy shows that the weight change of CA occurrs by dispersion of plasticizer as well as by absorption of water. Due to dispersion of plasticizer, the variation of the yield stress under dry-wet cyclic exposure is nonreversible.

A series of cyclic azoamidinium chlorides as water-soluble initiators were prepared by reactions of the iminoether derived from 2,2′-azobisisobutyronitrile with substituted alkylene diamines. The first-order rate constants for the decomposition of the azoamidinium salts varied from 0.59 × 10−5 to 14.1 × 10−5 s−1 with the ring size and the alkyl substitution of the ring. Decomposition of 2,2′-azobis[2-(imidazoline-2-yl)propane] dihydrochloride was found to be accelerated by alkyl substitution on the imidazolinium ring. However, the azoamidinium compounds having larger rings, 2,2′-azobis[2-(3,4,5-trihydropyrimi-dine-2-yl)propane] dihydrochloride and 2,2′-azobis[2-(4,5,6,7-tetra-hydro-1H-1,3-diazepine-2-yl)propane] dihydrochloride, decomposed at a slower rate than the unsubstituted azobis[2-(imidazoline-2-yl)-propane] dihydrochloride. These new initiators were found to be capable of initiating radical polymerizations of acrylamide and vinyl acetate.

The US economy had accelerated economic growth since the late 1990s. At first, many economists and policy makers believed that the rapid growth in the IT industry and IT investment contributed to the acceleration in US economic growth and many advanced countries supported the IT industry and IT investment in their own countries. However, the gap in rates of economic or productivity growth between the US and other advanced countries has remained even in the early 2000s. Since then, many economists have paid attention to the complementary role in intangible assets in productivity growth, that is, they started to believe that without intangible assets, the IT assets does not contribute to productivity growth at the firm and aggregated level.

The purpose of this paper is to measure intangible assets, to construct the capital stock of intangible assets, and to examine the contribution of intangible capital to economic growth in Japan. We follow the approach of Corrado, Hulten, and Sichel (2005, 2006) to measure intangible investment using the 2008 version of the Japan Industrial Productivity (JIP) Database. We find that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.6%, which is lower than the ratio estimated for the United States in the early 2000s. The ratio of intangible to tangible investment in Japan is also lower than equivalent values estimated for the United States. In addition, we find that, in stark contrast with the United States, where intangible capital grew rapidly in the late 1990s, the growth rate of intangible capital in Japan declined from the late 1980s to the early 2000s. In order to examine the robustness of our results, we also conducted a sensitivity analysis and found that the slowdown of the contribution of intangible capital deepening to economic growth and the recovery in Multi-Factor Productivity (MFP) growth from the second half of the 1990s observed in our base case remain unchanged even if we take on-the-job training and Japanese data with respect to investment in firm-specific resources into account.

Globalization and the ICT revolution of the 1990s have forced many firms to reorganize in order to survive in a more competitive market. There are several approaches that can be used to assess the measurement of organization capital since it is unobservable. Using an optimizing firm model and assuming that a firm holds multiple assets as suggested by Yang and Brynjolfsson (2001) and Cummins (2005), we examined whether organization capital is accumulated with investment in several types of assets. In contrast to Cummins's (2005) results, we found that the accumulation of organization capital is associated with investment in R&D assets and marketing assets. Using these results and following Basu, Fernald, Oulton, and Srinivasan (2003), we measured the contribution of organization capital to the conventional TFP growth. The estimation results implied that the growth of organization capital did not have significant effects on productivity growth.

Constructing thirty-seven industries database, we examines whether measured productivity in Japan is procyclical and investigates the sources of that procyclicality using the production function approach employed by Hall (1990) and Basu and Fernald (1995). At the aggregate level, the measured Solow residual shows procyclicality. Large numbers of industries show constant returns to scale. No significant evidence for the presence of thick-market externalities is found. Our results also hold when we consider labor hoarding, part-time employment, and the adjustment cost of investment. The results suggest policies to revitalize the Japanese economy should concentrate on promoting productivity growth.

In this paper we conducted a detailed analysis of Japan's TFP growth by making use of the Japan Industrial Productivity Database (the JIP Database) which we have recently completed. We got the following results. 1.After taking account of the quality of labor and the capacity utilization rate we found the decline in TFP growth at the macro-level from the 1980s to the 1990s not to be so great. Hayashi and Prescott (2002) seem to have overestimated the size of the TFP growth decline. 2.On the other hand, there was a substantial change in the pattern of sectoral TFP growth. The slowdown in TFP growth mainly occurred in the manufacturing sector. In contrast, TFP growth in the non-manufacturing sectors accelerated during the 1990s. 3.In the 1990s, substantial deregulations were accomplished in non-manufacturing industries, especially in communication, wholesale and retail trade, and finance, insurance and real estate, and this change seems to have contributed to the acceleration of TFP growth in these industries. But we should also note that, compared with other developed countries, Japan's TFP growth in the non-manufacturing sector is still quite low. 4.Regarding the manufacturing sector in the 1990s, the following three factors seem to have contributed to the low level of TFP growth. First, new entries were very limited. Secondly, the exit effect was negative, that is, the average TFP level of exiting firms was higher than that of staying firms. Thirdly, the reallocation effect of resources was small.

To elucidate the insulin action in skeletal muscles in insulin-dependent diabetes, the glucose uptake by isolated soleus muscles was studied in streptozotocin (STZ)-diabetic mice and nonobese diabetic (NOD) mice that develop insulinopenic diabetes spontaneously. The maximally insulin-stimulated uptake of 2-deoxyglucose was significantly decreased in spontaneously diabetic NOD mice with 3 to 6 weeks duration of diabetes (10.18 +/- 0.58 v 12.80 +/- 0.44 nmol/muscle/20 min, P less than .005), while basal 2-deoxyglucose uptake was not significantly altered in them. The net insulin-stimulated uptake measured individually was also significantly reduced in spontaneously diabetic NOD mice (1.33 +/- 0.23 v 4.07 +/- 0.40 nmol/muscle/20 min, P less than .001). This was the case with STZ-diabetic ICR mice with 6 weeks duration of diabetes and STZ-diabetic NOD mice with 2 weeks and 6 weeks durations of diabetes as well. The submaximal effect of insulin on 2-deoxyglucose uptake by the soleus muscle, defined as the percent of the maximal effect achieved at 10 ng/mL of insulin, was not significantly altered in STZ-diabetic NOD mice. These data suggest that a prolonged insulinopenic state might reduce the insulin-stimulated glucose uptake in skeletal muscles by diminishing the insulin responsiveness and cause the insulin resistance in diabetic animals.

This study describes insulin binding to circulating monocytes in 24 children with insulin-dependent diabetes mellitus (IDDM), five children with non-insulin-dependent diabetes mellitus (NIDDM), and 10 healthy and 12 obese control children. Insulin binding to monocytes was greatly increased in untreated IDDM children with obvious ketoacidosis (5.51 +/- 3.49 vs. 1.91 +/- 0.47 pg/10(6) cells, P less than 0.01), whereas it was decreased in those without obvious ketoacidosis (1.39 +/- 0.30 vs. 1.91 +/- 0.47 pg/10(6) cells, P less than 0.01). Insulin treatment restored insulin binding almost to the level of control children in both ketoacidotic and non-ketoacidotic patients. Insulin binding to monocytes was markedly decreased in untreated NIDDM children with hyperinsulinemia compared with healthy control children (0.73 +/- 0.27 vs. 1.91 +/- 0.47 pg/10(6) cells, P less than 0.01) or obese control children (0.73 +/- 0.27 vs. 1.33 +/- 0.35 pg/10(6) cells, P less than 0.01). These data indicate that changes in insulin secretion and metabolic conditions might be involved in the fluctuation of the number of insulin receptors in IDDM children as well as in NIDDM children.

Insulin binding to circulating erythrocytes was studied in nonobese diabetic (NOD) mice which develop insulinopenic diabetes mellitus spontaneously. NOD mice with a short duration of diabetes mellitus and mild insulinopenia did not show any change in insulin binding, while those with a long duration of diabetes mellitus and severe insulinopenia showed an increase in insulin binding compared with nondiabetic NOD mice (6.85 +/- 0.38% bound vs. 4.19 +/- 0.24% bound, p less than 0.01). This increase in insulin binding was due to an increase in the number of receptors. Insulin treatment of diabetic NOD mice significantly reduced the insulin binding by 64%, which resulted from a decrease in the number of the receptors. These results indicate that insulin binding to erythrocytes in NOD mice is controlled mostly by up-and-down regulation.

This book analyzes growth at the total economy and industry level from an international perspective, providing unique cross-country comparisons. The authors focus on the EU-25 countries but also include the US, Japan and Korea. The chapters explore growth patterns from a long-run perspective, although greater attention is paid to the period of expansion from 1995–2007 and the post 2008 period of crisis. Each contribution builds on a common methodology based on a detailed database providing a high degree of disaggregation with respect to the industries and factors accounting for growth. The role played by ICT is expertly emphasized, in particular the different paths followed in the US and the EU.

The purpose of the paper is to examine what kind of investment theory can explain the recent movements in corporate investment in Japan. To explain the drastic decline in corporate investment in the wake of the bubble economy, economists applied Tobins Q theory with liquidity constraints or uncertainty in sales or profits to empirical studies on investment behavior. On the other hand, the investment spike induced by the behavior under uncertainty is likely to generate overinvestment if many firms undertake large investments simultaneously. Using probit estimation, we examine the determinants of the investment spike. In this estimation, we find that not only Tobins Q and cash flow but also simultaneous investment behavior affects investment spikes. Tobins Q, liquidity constraint, irreversibility in investment, investment spike, probit Estimation JEL classification numbers: E22, E32, G31

Though the Japanese government has established several economic policies concerning the promotion of IT investment (including investment tax credit (ITC) from 2003 FY), there are few academic papers on IT investment in Japan. It is thus important to analyze empirically which factors affect IT investment and how ITC increases IT investment. Using the JIP (Japan Industry Productivity) database made by the project team on potential growth at ESRI (Economic and Social Research Institute), our paper investigates several phases of IT investment in Japan. Trends on IT investment in Japan and other OECD countries are examined and IT investment functions are estimated by using panel data model and the instrumental variable method. The amount of IT investment in Japan is not so low when we compare it with that in the United States and other OECD countries. However, especially in the communications industry, the amount of IT investment in Japan is much less than that in the U.S. As for software investment in Japan, in-house software has stagnated since the first half of 1990 due to downsizing and outsourcing. The estimation results on investment function show that:(1) Coefficient on cost of capital is significantly negative, which means ITC is effective. (2) Coefficient on spillover effect is significantly positive, which means that an increase in IT investment in a specific industry stimulates IT investment in other industries. (3) Estimated increment on IT investment via ITC in 2003 is about 1 to 2 trillion yen. The results show that tax reduction, a demand-stimulating policy, increases IT investment via the decline of the cost of capital. However, in the long run, it is also important to determine whether IT investment contributes to increased productivity and growth of the economy. Both a demand-side and a supply-side analysis should be carried out to clarify the full significance of IT investment.