Ricerc@Sapienza

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.