The research report answers to following questions: Does ICT increase the economic efficiency of regions? If there is such an effect, does it give equal opportunities to all regions? How has it developed with time? Is it possible to present an estimate of the magnitude of the effect?

Increase in the importance of knowledge in the economy, the advent of information industries, as well as other structural changes in the economy have transformed the preconditions for regional development. In many countries today, economic development shows tendencies towards regional concentration. Economically central modern regions often face a migration gain as well as growth of employment and income, whereas the opposite is the case in many peripheral areas. However this picture is by no means uniform, as it is enriched with mosaic like elements and exceptions. Also some far-away regions have shown successful development, making them interesting objects of study. When we add the effects of recent developments at the international institutional level, the regional outcomes become difficult to predict. Under these circumstances it was important to study the effects of the information sector on regional growth and development.

The study had a quantitative econometric orientation, and economic efficiency was chosen as the performance measure to be explained statistically. The study was conducted in two stages. First, efficiency scores were estimated for the NUTS 4 level regions by using Data Envelopment Analysis (DEA), a well known optimization method. These efficiency scores were then statistically explained by applying Tobit random effect panel models. Regional volume of ICT activity was used as an explanatory factor, together with several other regional variables.

Several interesting results were obtained. Increasing the volume of ICT in a Finnish region has a clear effect on efficiency. If the share of ICT in the whole regional economy grows by 5 percent units, average efficiency increases 1-2.5 % for the regions. This means that after such an ICT increase, a region can produce 1-2,5 % more goods and services than before, using the same resources as before. This means that the region's competitive position is enhanced, relative to other regions. Even a significant improvement in the relative position of a region can result, if many regions are close to one another, what comes to their performance levels. However, ICT does not seem to treat regions equally, for the beneficial effects of increasing ICT tend to concentrate to larger regions and those that already possess a competitive private sector. Small and inefficient regions do not derive a notable benefit, according to our estimations. By time this would increase economic concentration into larger centres. But poor accessibility does not in itself prevent a region from taking advantage of ICT, even though it tends to decrease the level of efficiency.

City of Helsinki Urban Facts
http://www.hel2.fi/tietokeskus/eng/
Mr. Ilkka Susiluoto

24/10/2005

24/10/2005

Ilkka Susiluoto

research

Urban Policy > Economy knowledge & employment > Research & innovation

Implementation & production