The Effect of Information Technology on Labor Productivity in the Iranian Manufacturing Industries: 2002-2007

The effect of Information Technology (IT) on labor productivity is examined by economists since 1990s. The results of empirical studies about the outcomes of IT are mixed. The aim of this paper is to analyze the effect of IT on labor productivity in the IT-producing and IT- using industries in Iran. The paned data of 23 industries are used based on 2-digit ISIC over the period 2002-2007. The findings of this paper indicate that the effect of IT capital on labor productivity is positive and statistically significant. Moreover, the results confirm that the labor productivity growth in "high IT-using" industries is greater than others, but there is no labor productivity differences between "IT-producing" and "ICT-using" industries. The elasticity estimates of the labor productivity related to IT capital range from 0.03 to 0.095 percent, this amount increases when the industry and time characteristics are included in the estimated model. The main findings confirm that productivity paradox isn’t observed in the manufacturing industries in Iran.