Information and Communication Technologies in a Multi-Sector Endogenous Growth Model

Abstract

This paper investigates the growth impact of Information and Communication Technologies (ICT) in an economy consisting of three sectors, ICT-producing, ICT-using and non-ICT-using. The ICT progress causes falling prices of the consumption and intermediates produced by the ICT-using sector, providing incentives for investment in the sectors using them. Therefore, the non-ICT-using sector benefits indirectly from ICT, while households' utility increases. The magnitude of the growth transmission mechanism relies on the ICT-using sector production shares. Aggregate economy is on a constant growth path, where growth rates differ across sectors. The model predictions are broadly consistent with the U.S. growth experience.

Keywords: Multi-sector Economy, Endogenous Growth, Constant Growth Path, Information and Communication Technologies

JEL Classification: O40, O41