Endogenizing the ICT sector: A multi-sector approach

Daniela Federici, Enrico Saltari and Clifford Wymer

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we present a non-linear model where 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, since 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 labour 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 allows to interpret the "Italian paradox" of an industrial structure marked by an increasing weight of the traditional sector.

Keywords: Nested CES production function; Elasticity of substitution; Endogenous technical progress and ICT technical change; Disequilibrium model; Continuous-time econometrics. (search for similar items in EconPapers)
JEL-codes: C51 E22 E23 O41 (search for similar items in EconPapers)
Date: 2015-09-17
New Economics Papers: this item is included in nep-ict and nep-mac
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Related works:
Journal Article: ENDOGENIZING THE ICT SECTOR: A MULTISECTOR APPROACH (2019)
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