Adoption and Impact of ICT on Labour Productivity in Africa: Evidence from Cross-country Firm Level Data

This paper uses a large cross-country firm-level database that contains information of about 6,300 firms from 19 sub-Saharan Africa (SSA) countries, collected by the United Nations Industrial Development Organization (UNIDO) in 2010 and 2011, to assess the determinants of adoption and use of Information and Communication Technologies (ICT) in SSA firms, while controlling for the problem of censoring that would exist in the modelling of ICT-capital adoption choice. The gain obtained from the adoption of ICT-capital investment has been examined by estimating the impact of ICT-capital on labour productivity in adopters’ firms, while considering the role of Organizational Changes (OC). Compared to the Cobb-Douglas production function the Translog production function has been tested to be more adequate with our data. Unlike previous work on the estimation of a production function and given the simultaneity between labour productivity and ICT-capital investments, the Instrumental Variables (IV) method, has been used to address this endogeneity problem. The descriptive analysis shows that East African firms, on average, adopt ICT-capital more than other African countries, while Southern African firms, on average, use ICT-capital more intensively than other sub-regions. Finally, we find that income, wages, and firms’ size are significant determinants of ICT-capital adoption. Moreover, the study reveals that the impact of ICT-capital intensity on labour productivity in SSA countries is positive and statistically significant in the presence of OC, which is robust to several different specification tests.