In recent years, many advanced economies have been characterized by a slowdown of productivity. We focus on the weak impact of the information and communication technology (ICT) adoption on the productivity dynamics of the economy. One of the explanations of this apparent modest contribution (the 'Solow paradox') underlines the difficulty in detecting the ICT specific role amid the overall slowing productivity growth. The project aims at showing that this productivity slowdown may be due to the negative externalities imposed on the economy by the ICT. For instance, firms such as Amazon and Ebay are free riding (or freeloading) on traditional retailers. Publishing is an example where those firms do not have the costs of maintaining a bookshop or a showroom but receive the benefits of traditional booksellers and retailers. We will examine the effect of these externalities within a framework of a nonlinear model where the ICT productivity contribution is endogenized. To this end, we will specify and estimate a two-level constant elasticity of substitution (CES) aggregate production function -- that nests two CES production functions into another CES function -- with four inputs (traditional and innovative capital, skilled and unskilled labor). With this specification, in the model there are two intermediate goods: a traditional good produced by capital, unskilled labor, and the ICT good produced by innovative capital and skilled labor. The final good is obtained combining the two intermediate goods. The model will be specified and estimated as continuous-time general disequilibrium framework. Exploiting this theoretical structure, we aim to measure the negative externalities imposed on the economy by the ICT.
More than thirty years later after Robert Solow observed 'seeing computers everywhere but in the productivity statistics,' the question of productivity gains from ICT remains unanswered. This research tries to give an answer to this long-lasting question by using a theoretical structure based on a nonlinear model where the ICT is endogenized. In doing so, it adopts a multisector framework whereby a final good is produced by using two intermediate goods, a traditional and an innovative one, thus making endogenous the ICT contribution to final output. Our aim is to specify and estimate a two-level CES aggregate production function that nests two CES production functions into another CES function. As a result, the ICT efficiency contribution (a rate of technical progress) to the traditional economy can be estimated. This contribution can be ambiguous. On the one hand, the use of ICT intermediate good increases the efficiency of the economy. This could arise from better communications, increased use of robots to replace labor, more efficient processing of transactions, better management control, control of inventories, cash, investments, etc. On the other, the use of ICT affects negatively the traditional economy imposing negative externalities on the traditional economy. This latter effect is especially relevant in economies, like Italy or Spain, where the weight of traditional sector is important. This latter effect can offset the former, and has thus the potential of explaining the productivity paradox not only in economies, like Italy's, where the traditional sector has a dominant weight, but also in more advanced countries, such as UK and USA.