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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: Enrico.Saltari@uniroma1.it.
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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 

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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.

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