Digitalization and Productivity Growth Slowdown in Production Networks
Ali Sen
Janeway Institute Working Papers from Faculty of Economics, University of Cambridge
Abstract:
I examine the recent productivity growth slowdown and the emergence of digital technologies through the lens of production networks. Digital technologies are increasingly embedded in intermediate inputs, and digital-intensive sectors, often key producers of intermediate and capital goods, amplify the positive effects of these technologies across industries. I show that the slowdown in computer-specific technical change has contributed to the decline in aggregate productivity growth, particularly in digital-intensive service industries, with these effects spreading through the economy via intersectoral linkages. My estimates suggest that this accounts for around 45–55% of the productivity growth slowdown in both the UK and the US since the mid-2000s. I attribute this slowdown largely to structural changes within the computers industry, especially the rising value-added intensity of the sector. In general, production in digital technology-producing industries is characterized by perfect complementarity, explaining the waning effects of digital technologies on aggregate productivity since the mid-2000s. In light of these findings, I take a pessimistic view on the future of productivity growth.
Keywords: Digitalization; Investment-Specific Technical Change; Production Networks; Productivity (search for similar items in EconPapers)
JEL-codes: D57 L23 L86 O30 O33 O47 (search for similar items in EconPapers)
Date: 2024-12-13
Note: as3372
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Working Paper: Digitalization and Productivity Growth Slowdown in Production Networks (2024) 
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camjip:2431
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