Does upstream regulation matter when measuring the efficiency impact of information technology? Evidence across EU and US industries

We examine the role of ICT in reducing industry level technical inefficiency, controlling for the impact of upstream regulations. We conduct industry level stochastic frontier analysis and estimate a technical inefficiency model which allows for an interaction between ICT and upstream regulation. A panel dataset from EU and US industries is used for the period 1995-2007. We find that ICT contributes significantly in reducing technical inefficiency in low technology manufacturing. In service industries this influence is strong only at low levels of regulation. Likewise, in the same sectors, anticompetitive regulation exerts an increasing effect on inefficiency. We fail to establish any significant influence of ICT on the efficiency of high technology industries. When considering alternative dimensions of regulation, most regression estimates confirm baseline results as regards the inefficiency influence of either ICT or regulation. However, the conditional impact of ICT differentiates and depends on the type of regulation examined.