ICT intermediates and productivity spillovers—Evidence from German and US manufacturing sectors

• Examination of ICT growth effects embedded in different types of intermediates.
• Comparison of German vs. US manufacturing sectors during the period 1991–2005.
• Imported non-ICT and ICT materials are more dominating in Germany.
• Domestically-produced non-ICT services and ICT materials were driving forces in the US.
• Different spillover effects from ICT intermediates on German and US TFP growth.

Recent pre-crisis growth accounting exercises attribute productivity growth accelerations to investments in information and communication technologies (ICT). Stylized facts about a growing US–EU productivity gap are confirmed for Germany, particularly showing no substantially economy-wide ICT effects for German sectors. Tracing the effect from ICT during 1991–2005, this study takes a different view by expanding the value-added concept to gross output including different types of intermediate inputs. The findings suggest that imported intermediate inputs played a more dominating role in Germany, particularly imported non-ICT and ICT materials. In the US, main drivers were domestically-produced non-ICT services and ICT materials, even though imported ICT materials were on the upraise post 1995. Moreover, German TFP growth experienced increasing returns to scale from domestically-produced ICT materials, while US TFP growth originated from imported ICT materials. It will be argued that these different productivity effects stem from different functions of ICT in the production process, which originated in the ICT-production sectors and were passed on to downstream sectors.