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CEP discussion paper
Information and Communication Technologies in a Multi-Sector Endogenous Growth Model
Evangelia Vourvachaki
August 2006
Paper No' CEPDP0750:
Full Paper (pdf)

JEL Classification: O40; O41

Tags: multi-sector economy; endogenous growth; balanced growth path; information and communication technologies

This paper investigates the impact of Information and Communication Technologies (ICT) on growth in an economy, consisting of three sectors, ICT-producing, ICT-using and non-ICT-using. The benefits from ICT come from the falling prices of the ICT-using sector’s good, which is used for the production of intermediate goods. Their falling prices provide incentives for investment for sectors using them, so the non-ICT using sector experiences sustained growth driven by capital accumulation. Rates of growth across the three sectors differ, but the aggregate economy is on a balanced growth path with constant labour shares across sectors. US evidence confirms the model’s predictions.