 The effects of digitalization on productionFlorentine Schwark and Andreas Tryphonides European Economic Review, 2025, vol. 171, issue C Abstract: How does digitalization transform the macroeconomic production function? Using a model where firms can choose their technology, we find that sectors with more digital capital exhibit a higher elasticity of substitution between value added and intermediate inputs and between capital and labor. This shift in the elasticity of substitution is consistent with a higher complementarity of input-specific technologies on the technology frontier. We further show that the link between technological complementarity and digital intensity can be rationalized using a task-based approach. Out of the three types of digital capital, only the levels of information technology and software/databases have a significant impact on the production function, whereas communication technology has no effects. We also find that digital technical change in value added is Hicks-neutral. Keywords: Digitalization; Elasticity of substitution; Productivity; Endogenous technology choice; Technology frontier; Task-based production (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:171:y:2025:i:c:s0014292124002253 DOI: 10.1016/j.euroecorev.2024.104896 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.