The Effects of Digitalization on Production

Florentine Schwark and Andreas Tryphonides

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: How does digitalization transform the macroeconomic production function? Within an endogenous technology choice framework, we find that sectors with more digital capital exhibit a higher elasticity of substitution between value-added and intermediate inputs and within value-added, between capital and labor. The shift in the elasticity of substitution is consistent with a higher complementarity of input-specific productivities. We also find that digitalization contributes to Hicks-neutral technical change in value added. Not all types of digital capital have a significant impact on the production function.

Keywords: Digitalization; Elasticity of substitution; Productivity; Endogenous technology choice; Technology frontier (search for similar items in EconPapers)
JEL-codes: E23 E25 O33 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2024-03-27
New Economics Papers: this item is included in nep-eff, nep-gro and nep-ino
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:02-2024

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