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Simulating the New Economy

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Author Info

  • Eliasson, Gunnar

    ()
    (Royal Institute of Technology)

  • Johansson, Dan

    ()
    (The Ratio Institute)

  • Taymaz, Erol

    (Middle East Technical University)

Abstract

The IT, the Internet, or the Computing & Communications (C&C) technology revolution has been central to the economic discussion for several decades. Before the mid-1990s the catchword was the “productivity paradox” coined by Robert Solow, who stated in 1987 that “computers are everywhere visible, except in the productivity statistics”. Then the New Economy and fast productivity growth fueled by C&C technology suddenly became the catchword of the very late 1990s. Its luster however, faded almost as fast as it arrived with the dot.com deaths of the first years of the new millennium. With this paper we demonstrate that the two paradoxes above are perfectly compatible within a consistent micro (firm) based macro theoretical framework of endogenous growth. Within the same model framework also a third paradox can be resolved, namely the fact that the previous major New Industry creation, the Industrial Revolution, only involved a handful of Western nations that had got their institutions in order. If the New Economy is a potential reality, one cannot take for granted that all industrial economies will participate successfully in its introduction. It all depends on the local receiver competence to build industry on the new technology. We, hence, also demonstrate within the same model the existence of the risk of failing altogether to capture the opportunities of a New Economy.

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Bibliographic Info

Paper provided by The Ratio Institute in its series Ratio Working Papers with number 52.

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Length: 47 pages
Date of creation: 21 Jun 2004
Date of revision:
Publication status: Published in Structural Change and Industrial Dynamics, 2004, pages 289-314.
Handle: RePEc:hhs:ratioi:0052

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Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-441 59 00
Fax: 08-441 59 29
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Web page: http://www.ratio.se/
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Keywords: Industrial simulation; Innovation and growth; The New Economy; Non-linear dynamics;

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References

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  1. Robert J. Gordon, 2000. "Does the "New Economy" Measure up to the Great Inventions of the Past?," NBER Working Papers 7833, National Bureau of Economic Research, Inc.
  2. Eliasson, Gunnar, 1977. "Competition and Market Processes in a Simulation Model of the Swedish Economy," American Economic Review, American Economic Association, vol. 67(1), pages 277-81, February.
  3. Andrew Atkeson & Patrick J. Kehoe, 2001. "The transition to a new economy after the Second Industrial Revolution," Working Papers 606, Federal Reserve Bank of Minneapolis.
  4. Ballot, Gerard & Fakhfakh, Fathi & Taymaz, Erol, 2001. "Firms' human capital, R&D and performance: a study on French and Swedish firms," Labour Economics, Elsevier, vol. 8(4), pages 443-462, September.
  5. Ballot, Gérard & Taymaz, Erol, 1993. "Firm-Sponsored Training, Technical Progress and Aggregate Performance in a Micro-Macro Model," Working Paper Series 402, Research Institute of Industrial Economics.
  6. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
  7. Carlsson, Bo A W, 1983. "Industrial Subsidies in Sweden: Macro-Economic Effects and an International Comparison," Journal of Industrial Economics, Wiley Blackwell, vol. 32(1), pages 1-23, September.
  8. Eliasson, Gunnar & Johansson, Dan & Taymaz, Erol, 2005. "Firm Tunrover and the Rate of Macroeconomic Growth - Simulating the Macroeconomic Effects of Schumpeterian Creative Destruction," Ratio Working Papers 66, The Ratio Institute.
  9. Dale W. Jorgenson, 2001. "Information Technology and the U. S. Economy," Harvard Institute of Economic Research Working Papers 1911, Harvard - Institute of Economic Research.
  10. Abramovitz,Moses, 1989. "Thinking about Growth," Cambridge Books, Cambridge University Press, number 9780521333962.
  11. Anonymous, 1991. "Research Reports And Updates," Journal of Food Distribution Research, Food Distribution Research Society, vol. 22(1), February.
  12. Eliasson, Gunnar, 1988. "The Firm as a Competent Team," Working Paper Series 207, Research Institute of Industrial Economics, revised Feb 1990.
  13. Eliasson, Gunnar, 1991. "Modeling the experimentally organized economy : Complex dynamics in an empirical micro-macro model of endogenous economic growth," Journal of Economic Behavior & Organization, Elsevier, vol. 16(1-2), pages 153-182, July.
  14. Eliasson, Gunnar, 1990. "The firm as a competent team," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 275-298, June.
  15. Eliasson, Gunnar, 1984. "Micro heterogeneity of firms and the stability of industrial growth," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 249-274.
  16. Gunnar Eliasson & Asa Eliasson, 1996. "The biotechnological competence bloc," Revue d'Économie Industrielle, Programme National Persée, vol. 78(1), pages 7-26.
  17. Robert J. Gordon, 2000. "Interpreting the "One Big Wave" in U.S. Long-Term Productivity Growth," NBER Working Papers 7752, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Gunnar Eliasson, 2011. "Advanced purchasing, spillovers and innovative discovery," Journal of Evolutionary Economics, Springer, vol. 21(1), pages 121-139, February.
  2. Thomas Brenner & Claudia Werker, 2007. "A Taxonomy of Inference in Simulation Models," Computational Economics, Society for Computational Economics, vol. 30(3), pages 227-244, October.
  3. Eliasson, Gunnar & Eliasson, Åsa, 2004. "The Theory of the Firm and the Markets for Strategic Acquisitions," Ratio Working Papers 44, The Ratio Institute.
  4. Ester Gomes da Silva & Aurora A.C. Teixeira, 2006. "Surveying structural change: seminal contributions and a bibliometric account," FEP Working Papers 232, Universidade do Porto, Faculdade de Economia do Porto.
  5. Eliasson, Gunnar & Braunerhjelm, Pontus, 2012. "Entrerpreneurial Catch Up And New Industrial Competence Bloc Formation In The Baltic Sea Region," Working Paper Series in Economics and Institutions of Innovation 279, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  6. Eliasson, Gunnar & Johansson, Dan & Taymaz, Erol, 2005. "Firm Tunrover and the Rate of Macroeconomic Growth - Simulating the Macroeconomic Effects of Schumpeterian Creative Destruction," Ratio Working Papers 66, The Ratio Institute.
  7. Thomas Brenner & Claudia Werker, 2006. "A Practical Guide to Inference in Simulation Models," Papers on Economics and Evolution 2006-02, Philipps University Marburg, Department of Geography.

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