Hostname: page-component-cd9895bd7-q99xh Total loading time: 0 Render date: 2024-12-23T07:06:50.543Z Has data issue: false hasContentIssue false
  • English
  • Français

ENDOGENIZING THE ICT SECTOR: A MULTISECTOR APPROACH

Published online by Cambridge University Press:  20 September 2017

Clifford R. Wymer ,
Enrico Saltari  and
Daniela Federici
Clifford R. Wymer
Affiliation:
Sapienza University of Rome
Enrico Saltari*
Affiliation:
Sapienza University of Rome
Daniela Federici
Affiliation:
University of Cassino and Southern Lazio
*
Address correspondence to: Enrico Saltari, Dipartimento di Economia e Diritto, Sapienza Università di Roma, via del Castro Laurenziano 9, 00161, Rome, Italy; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

In this paper, we present a nonlinear model where the information and communication technology (ICT) sector is endogenized. In the model, there are two intermediate goods: a traditional good produced by capital and labor and the ICT good produced by innovative capital and skilled labor. The final good is obtained combining the two intermediate goods. The model is specified and estimated as continuous-time general disequilibrium framework. Our main results are the following. We find that the elasticity of substitution of the aggregate sector has a value intermediate between that of the ICT sector and that of the traditional sector, indicating that the input complementarity is tighter in the former than in the latter. Moreover, in all the sectors elasticities are well below 1. As for the traditional sector, whose share is predominant in the production of the final good, the input complementarity helps explain most of the labor share decline of Italian economy as a consequence of the slowdown in the growth of capital intensity. In the ICT sector, technological progress, both in the form of capital augmenting and capital bias, showed a decline over the sample period with an obvious negative consequence on the global evolution of the technical progress. The results about the dynamics of the two intermediate sectors allow to interpret the “Italian paradox” of an industrial structure marked by an increasing weight of the traditional sector and the difficulties encountered by the Italian economy in exiting from its actual worst recession since the 1930s.

Keywords

Nested CES Production FunctionElasticity of SubstitutionEndogenous Technical Progress and ICT Technical ChangeDisequilibrium ModelContinuous-Time Econometrics
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Special Issue S1: Special Issue in Honor of Clifford Wymer on Developments in Macroeconomics , September 2019 , pp. 25 - 58
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are grateful to Kieran Donaghy, Giancarlo Gandolfo, and Ichiro Tokutsu for their useful comments and suggestions. We would also like to thank participants at Large-scale Crises: 1929 vs 2008 Conference, December 17–19, 2015, Università Politecnica delle Marche, Ancona, Italy, at Institute of Social and Economic Research, April 20, Osaka University, Japan, and at the Workshop in honor of Clifford Wymer “Development in Macroeconomics,” June 16–17, 2016, Sapienza University of Rome, Italy. We acknowledge financial support by Sapienza University of Rome. The usual disclaimer applies.

References

REFERENCES

Acemoglu, D. (2008) Introduction to Modern Economic Growth. Princeton: Princeton University Press.Google Scholar
Aghion, P. and Howitt, P. (2009) The Economics of Growth. Cambridge, MA: MIT Press.Google Scholar
Arrow, K. J., Chenery, H. B., Minhas, B. S., and Solow, R. M. (1961) Capital-labor substitution and economic efficiency. Review of Economics and Statistics 43, 225–250.Google Scholar
Bergstrom, A. R. and Nowman, K. B. (2007) A Continuous Time Econometric Model of the United Kingdom with Stochastic Trends. Cambridge, UK: Cambridge University Press.Google Scholar
Blanchard, O. J. (1997) The medium run. Brookings Papers on Economic Activity 2, 89–158.Google Scholar
Chirinko, R., Fazzari, S. M., and Meyer, A. P. (1999) How responsive is business capital formation to its user cost? An exploration with micro data. Journal of Public Economics 74 (October), 53–80.Google Scholar
Ciccarone, G. and Saltari, E. (2015) Cyclical downturn or structural disease? The decline of the Italian Economy in the last twenty years. Journal of Italian Modern Studies 20 (2), 228–244.Google Scholar
Donaghy, K. P. (1993) A continuous time model of the United States economy. In Gandolfo, G. (ed.), Continuous Time Econometrics. London: Chapman & Hall.Google Scholar
Federici, D. and Saltari, E. (2016a) Elasticity of substitution and the stagnation of Italian productivity. Economics of Innovation and New Technology 25 (5), 503–515.Google Scholar
Federici, D. and Saltari, E. (2016b) Elasticity of substitution and technical progress: Is there a misspecification problem? Macroeconomic Dynamics, 1–21. doi:10.1017/S1365100516000031Google Scholar
Fernald, J. G. (2014) Productivity and potential output before, during, and after the great recession. NBER Macroeconomics Annual 29 (1), 1–51.Google Scholar
Gandolfo, G. and Padoan, P. C. (1990) The Italian continuous time model, theory and empirical results. Economic Modelling (7), 91–132.Google Scholar
Gomez-Salvador, R., Stocker, A., and Turunen, J. (2006) Labour Productivity Developments in the Euro Area. European Central Bank Occasional paper no. 53.Google Scholar
Hicks, J. R. (1963) The Theory of Wages, 2nd ed. London: MacMillan & Co. (first edition published in 1932).Google Scholar
Jonson, P. D., Moses, E. R., and Wymer, C. R. (1977) The RBA 76 model of the Australian economy. In Proceedings Conference in Applied Economic Research, pp. 9–36. Sydney: Reserve Bank of Australia.Google Scholar
Karabarbounis, L. and Neiman, B. (2014) The global decline of the labor share. Quarterly Journal of Economics 129 (1), 61–103.Google Scholar
Klump, R. and de La Grandville, O. (2000) Economic growth and the elasticity of substitution: Two theorems and some suggestions. American Economic Review 90, 282–91.Google Scholar
Klump, R., McAdam, P., and Willman, A. (2008) Unwrapping some euro area growth puzzles: Factor substitution, productivity and unemployment. Journal of Macroeconomics 30 (2) 645–66.Google Scholar
Klump, R. and Preissler, H. (2000) CES production functions and economic growth. Scandinavian Journal of Economics 102, 41–56.Google Scholar
Knight, M. D. and Wymer, C. R. (1978) A macroeconomic model of the United Kingdom. IMF Staff Papers 25, 742–778.Google Scholar
La Grandville, O. de (1989) In quest of the Slutsky diamond. American Economic Review 79, 468–481.Google Scholar
La Grandville, O. de (2009) Economic Growth: A Unified Approach. Cambridge: Cambridge University Press.Google Scholar
León-Ledesma, M. A., McAdam, P., and Willman, A. (2010) Identifying the elasticity of substitution with biased technical change. American Economic Review 100 (4), 1330–1357.Google Scholar
Nieuwenhuis, H. J. (1995) Continuous Time Econometrics Modelling with an Application to the Dutch Economy. Den Haag: Labyrinth.Google Scholar
OECD (2015) Main Science and Technology Indicators, vol. 2015, issue 1. Paris: OECD Publishing.Google Scholar
Palivos, T. and Karagiannis, G. (2010) The elasticity of substitution as an engine of growth. Macroeconomic Dynamics 14 (5), 617–628.Google Scholar
Robinson, C., Stokes, L., Stuivenvold, E., and van Ark, B. (2003) Industry structure and taxonomies. In O'Mahony, M. and van Ark, B. (eds.), EU Productivity and Competitiveness: An Industry Perspective, pp. 37–71. Luxembourg: European Communities.Google Scholar
Saltari, E., Wymer, C., Federici, D., and Giannetti, M. (2012) Technological adoption with imperfect markets in the Italian economy. Studies in Nonlinear Dynamics & Econometrics 16, 2.Google Scholar
Saltari, E., Wymer, C., and Federici, D. (2013) The impact of ICT and business services on the Italian economy. Structural Change and Economic Dynamics 25, 110–118.Google Scholar
Sato, K. (1967) A two-level constant-elasticity-of-substitution production function. Review of Economic Studies 43, 201–218.Google Scholar
Solow, R. (1957) Technical change and the aggregate production function. Review of Economics and Statistics 39, 312–320.Google Scholar
Solow, R. M. (1987) Nobel lecture. Reprinted in Solow, R. M. (2000) Growth Theory: An Exposition, Chapter 1. Oxford: Oxford University Press.Google Scholar
Turnovsky, S. J. (2002) Intertemporal and intratemporal substitution and the speed of convergence in the neoclassical growth model. Journal of Economic Dynamics and Control 26, 1765–1785.Google Scholar
Wilson, D. J. (2009) IT and beyond: The contribution of heterogeneous capital to productivity. Journal of Business and Economic Statistics 27, 52–70.Google Scholar
Xue, J. and Yip, C. K. (2012) Factor substitution and economic growth: A unified approach. Macroeconomic Dynamics 16 (4), 625–656.Google Scholar