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Information Technology, Globalization, and Growth: Role for Scale Economies, Terms of Trade, and Variety

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  • Catherine Mann

    ()
    (International Business School, Brandeis University)

Abstract

This paper considers three channels through which globalization of information technology products may affect economic growth: Terms of trade in IT products in international trade, economies of scale in IT production and trade, and variety in IT consumption and trade. The empirical question relevant for policy makers is, what is the relative magnitudes of these channels. To catalyze economic growth and enhance performance, should policymakers promote IT exports to exploit economies of scale in production? Or, should they promote imports and domestic consumption of a variety of IT products to gain from falling IT prices, get more variety, and through these channels support faster TFP? Using a sample of 36 countries for 2000-2007, the findings are: (1) Importers of IT gain relatively more than exporters, on average, from the declining prices of IT coming through international trade. (2) Despite falling IT prices, most exporters enjoy positive economy-wide benefits of trading in IT because of economies of scale in production. (3) The extent of variety of traded IT products is related to the deviation of a country’s experience from that of the average country in its peer group. Controlling for trade patterns, the countries that are below average (in terms of economy-wide benefits from trade in IT) are also those that import and export the least variety of IT products. This suggests that gains to variety in consumption outweigh gains from economies of scale in production.

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File URL: http://www.brandeis.edu/departments/economics/RePEc/brd/doc/Brandeis_WP27.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Brandeis University, Department of Economics and International Businesss School in its series Working Papers with number 27.

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Length: 25 pages
Date of creation: Feb 2011
Date of revision:
Publication status: Forthcoming in After the Fall: Re-Growing Economic Growth
Handle: RePEc:brd:wpaper:27

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Postal: MS032, P.O. Box 9110, Waltham, MA 02454-9110
Web page: http://www.brandeis.edu/departments/economics/
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  1. Chen, Yongmin & Feenstra, Robert C., 2008. "Buyer investment, export variety, and intrafirm trade," European Economic Review, Elsevier, vol. 52(8), pages 1313-1337, November.
  2. Catherine L. Mann & Sue E. Eckert, 2000. "Global Electronic Commerce: A Policy Primer," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 318, July.
  3. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," Econometric Society 2004 North American Summer Meetings 508, Econometric Society.
  4. Bart van Ark & Robert Inklaar & Robert H. McGuckin, 2002. "'Changing Gear' - Productivity, ICT and Services Industries: Europe and the United States," Economics Program Working Papers 02-02, The Conference Board, Economics Program.
  5. Ark, Bart van, 2005. "Does the European Union need to revive productivity growth," GGDC Research Memorandum 200575, Groningen Growth and Development Centre, University of Groningen.
  6. Nicholas Crafts, 2004. "Social savings as a measure of the contribution of a new technology to economic growth," Economic History Working Papers 22554, London School of Economics and Political Science, Department of Economic History.
  7. Robert C. Feenstra & Alan Heston & Marcel P. Timmer & Haiyan Deng, 2004. "Estimating Real Production and Expenditures Across Nations: A Proposal for Improving the Penn World Tables," NBER Working Papers 10866, National Bureau of Economic Research, Inc.
  8. Catherine L. Mann & Jacob Funk Kirkegaard, 2006. "Accelerating the Globalization of America: The Role for Information Technology," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3900, July.
  9. Sung-Bae Mun & M. Ishaq Nadiri, 2002. "Information Technology Externalities: Empirical Evidence from 42 U.S. Industries," NBER Working Papers 9272, National Bureau of Economic Research, Inc.
  10. Hyunbae Chun & M. Ishaq Nadiri, 2008. "Decomposing Productivity Growth in the U.S. Computer Industry," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 174-180, February.
  11. Christian Broda & Joshua Greenfield & David Weinstein, 2006. "From Groundnuts to Globalization: A Structural Estimate of Trade and Growth," NBER Working Papers 12512, National Bureau of Economic Research, Inc.
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