Spillover Effects of Production of IT on Use of IT

We analyze new data on the production and use of IT around the world to assess the impact of changes in IT production in the 1990’s on economic development. We provide empirical evidence on a fundamental question: Besides the direct effect on GDP, does an emphasis on IT production have a spillover effect on the level of IT diffusion? We show that the results of our diffusion model indicates that the correlation between production of IT goods and use of goods is confined to specific scenarios and, in the case of developing economies, may have a substitution effect. Based on our analysis, we conclude that the experiences of developing economies with respect to production of IT may not include the same demand stimulation effect that has been enjoyed in developed economies. This has an impact on the computer development policies of developing economies.