Information and Communication Technology Capital Services: History
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Contributor:
Huifang E
,
Shuangjie Li
,
Liming Wang
,
Huidan Xue

The development of information and communication technology (ICT) has promoted the modernization and transformation of industrial development. It has driven the development of big data, artificial intelligence, the Internet, Internet of Things, cloud computing and other modern new industries to inject new vitality into economic growth, and has become an important support for high-quality economic development.

  • ICT capital services
  • economic growth decomposition framework
  • energy efficiency

1. Introduction

The development of information and communication technology (ICT) has promoted the modernization and transformation of industrial development. It has driven the development of big data, artificial intelligence, the Internet, Internet of Things, cloud computing and other modern new industries to inject new vitality into economic growth, and has become an important support for high-quality economic development [1]. ICT has characteristics of a general-purpose technology and, through its extensive integration and penetration with traditional industries, has improved production efficiency and increased output. Especially with the accelerated replacement of ICT-related equipment and decreasing prices of ICT, the substitution of ICT for traditional capital and labor is enhanced, and ICT provides more efficient production and services [2]. The continuous accumulation of ICT capital has gradually become an important factor for supporting economic growth.
In 2015, all member states of the United Nations adopted “the 2030 Agenda for Sustainable Development”, which outlines 17 Sustainable Development Goals (SDGs) [3]. SDG 7 aims to double global energy efficiency by 2030, while SDG 12 emphasizes the importance of sustainable management and efficient use of natural resources. Improving energy efficiency is crucial to achieving sustainable development. The development of ICT not only contributes to improving economic quantity, but also to enhancing economic quality. In the context of sustainable development strategy, achieving green production and solving environmental problems are the main tasks, and China’s “carbon peaking and carbon neutrality” strategic goal requires reducing energy consumption and improving energy efficiency, in which the development of ICT can empower the industry to opt for clean production, energy saving and recycling [4][5][6]. Improving energy efficiency is an important way to resolve energy shortages and environmental pollution. The widespread application of ICT on one hand accelerates the construction of information infrastructure, while on the other hand, through scientific and technological innovation, it helps to explore the development path of digitalization and greening, and boosts energy saving and emission reduction [7].
As the world’s second largest economy, although China has tremendous economic potential, there is still a lot of effort to be made in terms of energy conservation and emission reduction. In 2020, China’s primary energy consumption increased by 2.1%, down from an average annual growth rate of 3.8% over the previous decade, while global primary energy consumption decreased by 4.5%, which was the largest and the first-ever decrease recorded. Over the past decade, the proportion of China in primary energy consumption has been increasing slightly, constituting 26% in 2020, ranking it first globally [8]. Figure 1 shows the primary energy consumption of China and the world, and China’s proportion during the period 2010–2020, and it is evident that China has a high energy consumption level. It is to be noted that high energy consumption leads to high carbon emissions. The average annual growth rate of China’s carbon dioxide emissions is 1.97% during the period 2010–2020, significantly higher than the world average annual growth rate of 0.31%, and its proportion of world carbon dioxide emissions shows a slight upward trend, comprising 31% in 2020, ranking first globally, as shown in Figure 2 [8]. China is currently facing a serious global challenge in terms of energy conservation and carbon emission reduction. Therefore, it has become increasingly urgent to implement various measures to improve energy efficiency.
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Figure 1. The primary energy consumption of China and the world, and China’s proportion during the period 2010–2020 (EJ, %).
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Figure 2. The carbon dioxide emissions of China and the world, and China’s proportion during the period 2010–2020 (million tons, %).
In September 2021, the “Opinions on Complete and Accurate Implementation of the New Development Concept to Do a Good Job of Carbon Peaking and Carbon Neutral Work” was issued by the Central Committee of the Communist Party of China and the State Council [9]. The document outlines several goals, including the improvement of energy efficiency in information technology infrastructure, such as data centers and new communications, acceleration of the development of new generation of information technology, and promotion of deep integration of emerging technologies such as the Internet, big data, artificial intelligence, and fifth-generation mobile communications (5G) with green and low-carbon industries. This highlights the vital role of ICT development in achieving energy conservation and emission reduction targets, providing a policy basis to investigate the impact of ICT development on energy efficiency.
To promote sustained economic growth and tackle pressing issues, such as energy conservation and emission reduction, researchers aim to achieve the following objectives: (1) Measure the scale of ICT capital services in China and their distribution across industries as capital investment continues to grow. (2) Estimate the contribution of ICT capital services to China’s economic growth and analyze differences in their contribution among 19 industries. (3) Investigate the impact of ICT capital services on energy efficiency, specifically examining whether they lead to improvements in energy efficiency.

2. ICT and Economic Growth

The reasons for economic growth can be attributed to factor inputs and total factor productivity, and the significant contribution of ICT capital as an important component of capital input factors in economic growth has been confirmed in many studies. In the framework of economic growth accounting, Oliner and Sichel [10] divided capital into IT capital (hardware, software, and communication equipment) and other capital, and concluded that the contribution of IT capital to non-agricultural economic growth in the U.S. increased during the period 1974–1999, and its average contribution grew to 22.82% during the period 1996–1999. Jorgenson [11] showed that declining prices for IT products contributed to the post-1995 recovery in the U.S. economy, with the average contribution of IT capital to GDP at 29.85% during the period 1995–1999, which is significantly higher than the contribution in the earlier period. Jorgenson and Vu [12] decomposed the economic growth of the world’s major economies, and the results showed that for the economic recovery period from 1995 to 2003, nearly half of the economic growth originated from the accumulation and efficient allocation of capital; and that the rapid growth of investment in IT capital equipment and software was the main driving force, leading to almost doubling its contribution to economic growth compared to the previous period. Vu [13] showed that the contribution of ICT capital to Singapore’s GDP increased during the period 1990–2008, while in the period 2002–2008, its contribution to the growth was 33.30%.
Shahiduzzaman and Alam [14] constructed a linear production function model of IT capital affecting value-added, and the coefficients were 0.001, 0.08, and 0.07, respectively in the regressions over three time periods from 1975–2011; the contribution of IT declined slightly in the last period, but the contribution of IT capital to labor productivity and technological progress was continuously significant in Australia. Appiah-Otoo and Song [15] constructed an ICT development index from mobile, internet, and fixed broadband, divided 123 countries into rich countries and poor countries, and using regression analysis found that ICT contributed significantly more to GDP in poor countries compared to rich countries. Tsachtsiris et al. [16] used the Cobb–Douglas production function to estimate the output elasticity of ICT capital to GDP for the EU-27 countries, for the period 1996–2016, and concluded that for every 10% increase in ICT capital, GDP would increase by 0.92%; the result within the range of elasticities estimated by other studies and collated by Cardona et al. [17] exhibits a significant growth-promoting effect. Díaz-Roldán and Ramos-Herrera [18] applied panel data regression on the EU-27 countries during the period 2008–2018 and concluded that ICT promoted per capital economic growth in the European countries.
The impact of the development of ICT on China’s economic growth has been addressed by some previous studies. Representative results and findings can be summarized as follows. The growth rate of gross products for China’s information industries was 29.07% during the period 1991–2001, which was higher than that of the three traditional industries. The information abundance coefficient, which represents the development of ICT, had a strong and positive contribution to the growth of GDP [19]. Wang and Yu [20] calculated China’s informatization index and found it had a greater driving effect on the value-added of secondary industry than primary and tertiary industries during the period 1990–2002. Sun et al. [21] studied the economic growth contribution of ICT in 33 industries during the period 1994–2005, and the results showed that the contribution of ICT to China’s economic growth originated from increased ICT capital and TFP improvement in ICT industries; the improvement effect of ICT on TFP in other industries was not significant. Yang and He [22] analyzed the contribution of ICT capital to economic output and TFP in China over the period 1991–2013 using the economic growth accounting framework, and showed that the growth of hardware investment greatly influenced the contribution of ICT to the output growth and TFP, but lagged behind global levels. Liu and Zhang [23] measured the development of ICT from the internet penetration rate, total employment in the urban communication industry, mobile phone penetration, fixed broadband penetration rate, and constructed regression analysis with GDP using provincial data during the period 2008–2013. The conclusion was that ICT development plays a significant role in enhancing China’s economic growth. The average contribution rate of the substitution effect of ICT capital to economic growth was 9.84% during the period 2010–2012 [24]; in the study of Cai and Niu [2], the average contribution was 7.65% during the period 2015–2018; and in the study of Zhou [25], the average contribution was 7.05% during the period 2016–2020. With the development of the digital economy, ICT is also regarded as digital technologies, which promote the development of China’s digital economy through substitution and synergy effects [26].
From the review of existing studies, methods to analyze the impact of ICT on economic growth mainly include: (1) constructing an economic growth decomposition framework to decompose the contribution of ICT capital; (2) constructing a composite index of ICT development and conducting econometric regression; and (3) estimating the factor output elasticity of ICT capital on output. Furthermore, studies have mainly focused on the national level, but there are a few focused on the industry level. The impact of ICT on economic growth changes in different periods, with some studies indicating a weak impact in the early period, a strong boost in the middle period, and a slight turn to weakness in the late period. The measures of ICT capital invested to production differ between capital stock and capital services. Most studies measure the direct impact of ICT on economic growth, while some studies measure it indirectly in terms of promoting total factor productivity.

3. ICT and Energy Efficiency

The development of ICT is closely related to energy consumption and energy efficiency. Ishida [27] estimated the relationship between ICT and energy consumption in Japan and concluded ICT investment could contribute to a moderate reduction in energy consumption over the period 1980–2010. Schulte et al. [28] studied 27 industries in 10 OECD countries during the period 1995–2007 and showed that the development of ICT reduced non-electric energy demand, but it had no correlation with electric energy demand, and overall, significantly associated with the reduction in total energy demand. May et al. [29] analyzed research literature on energy management and showed that the application of ICT in process automation, production control, monitoring and decision making, and integration of processes and information flows improved energy efficiency. Khuntia et al. [30] found that green IT investment reduced energy consumption and was associated with a higher profit impact. The study by Zhang and Wei [31] showed that every time the standard deviation of the application of ICT in Chinese manufacturing enterprise production increased by one unit, the energy intensity would decrease by 0.23 units.
There are also studies indicating that ICT can increase energy consumption. Zhou et al. [32] found that ICT contributed to a 4.54% increase in energy intensity, but ICT input substitution was conducive to reducing energy use in production during the period from 2002 to 2012. Sun et al. [33] showed that the application of infrastructure, such as ICT, increased energy consumption in BRICS countries during the period 1990–2018. Meanwhile, Tzeremes et al. [34] thought that the development of ICT was beneficial to energy transition and solving environmental problems in BRICS countries. Wang et al. [35] constructed an ICT maturity index to study the impact of China’s ICT development on energy consumption in different stages during the period 2001–2030, and concluded that although the development of ICT could slow down the continuous growth of energy consumption by improving energy efficiency, the use of ICT increased energy consumption; this was in line with the findings of Lange et al. [36]. Popkova et al. [37] concluded that the use of ICT in e-government could improve energy efficiency and reduce environmental pollution, and that there were differences in the effects between developed and developing countries. Bildirici et al. [38] studied the G7 countries during the period 1990–2020 and showed that in the short term, the development of ICT increased energy consumption and environmental pollution, but in the long term, it improved energy efficiency, promoted economic growth, and reduced environmental pollution. Hao et al. [39], and Gao et al. [40] constructed a comprehensive ICT development index for China’s cities and provinces, and both studies concluded that the development of ICT promoted green total factor energy efficiency.
From the above studies, it can be seen that there are differences in findings as to whether ICT development increases or decreases energy consumption, mainly due to differences in the stage of the research and the research objectives. However, the results of previous studies have reached a consensus that ICT can promote energy efficiency. In addition, most existing research mainly focus on national level analysis.
In summary, most existing studies on the relationship between ICT and economic growth have neither reached a consistent conclusion nor provided a credible measurement of ICT capital services. Similarly, prior analyses on the relationship between ICT and energy efficiency have primarily focused on China’s national level. In contrast, researchers aim to measure the impact of ICT capital services on economic growth and energy efficiency at both national and industry levels. First, capital services in China and 19 industries are measured according to the Measuring Capital-OECD Manual 2009. Second, the direct contribution of ICT capital services on economic growth is decomposed using the economic growth decomposition framework and analyzed at national and industry levels; the industry differences are also discussed. Third, the energy efficiency of major energy-consuming industries is measured, and the impact of ICT capital services on energy efficiency and industry differences are analyzed by constructing a panel regression model.

This entry is adapted from the peer-reviewed paper 10.3390/en16093926

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