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Long term implications of the ICT revolution: applying the lessons of growth theory and growth accounting

Oulton, Nicholas (2012) Long term implications of the ICT revolution: applying the lessons of growth theory and growth accounting. Economic Modelling, 29 (5). pp. 1722-1736. ISSN 0264-9993

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Abstract

How big a boost to long run growth can countries expect from the ICT revolution? I use the results of growthaccounting and the insights from a two-sector growth model to answer this question. A two-sector rather than a one-sector model is required because of the very rapid rate at which the prices of ICT products have fallen in the past and are expected to fall in the future. According to the two-sector model, the main boost to growth comes from ICT use, not ICT production. Even a country with zero ICT production can benefit via improving terms of trade. I quantify this effect for 15 European and 4 non-European countries, using the EU KLEMS database. The ICT intensity of production (the ICT income share) is much lower in many European countries than it is in the United States or Sweden. Nevertheless the contribution to long run growth stemming from even the current levels of ICT intensity is substantial: about half a per cent per annum on average in these 19 countries. If ICT intensity reached the same level as currently in the U.S. or Sweden, this would add a further 0.2 percentage points per annum to long run growth

Item Type: Article
Official URL: http://www.elsevier.com/wps/find/intro.cws_home/at...
Additional Information: © 2012 Elsevier B.V.
Library of Congress subject classification: H Social Sciences > HB Economic Theory
T Technology > T Technology (General)
Journal of Economic Literature Classification System: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E23 - Production
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 20 Jun 2012 12:35
URL: http://eprints.lse.ac.uk/44414/

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