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The new economy: reality and policy

  • John Van Reenen

This paper concerns the new economy (alias the knowledge-based economy). I examine the different meanings attached to the new economy term and the evidence surrounding it, concentrating on the upsurge in US productivity growth between 1995 and 2000. I argue that the reports of the death of the new economy have been greatly exaggerated. There is evidence that information technology has transformed the US economy and is thus likely to have a strong impact on the UK economy in coming years. I discuss how elements of public policy should adapt to these economic changes, both in terms of an overall framework and in applications to specific areas (technology policy, human capital policy, competition policy and industrial policy). The new economy is a place of hope and fear. The hope is that policy activism can cement in potential productivity gains; the fear is that government actions will not mitigate the seemingly ineluctable pressures towards social exclusion.

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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 22 (2001)
Issue (Month): 3 (September)
Pages: 307-336

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Handle: RePEc:ifs:fistud:v:22:y:2001:i:3:p:307-336
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  1. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June.
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  9. repec:oup:restud:v:67:y:2000:i:4:p:635-66 is not listed on IDEAS
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  11. No authors listed, 2001. "New Economy," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 27(1), pages 1-.
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  13. Martin N. Baily & Robert Lawrence, 2001. "Do We Have A New E-Conomy?," NBER Working Papers 8243, National Bureau of Economic Research, Inc.
  14. Austan Goolsbee, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," NBER Working Papers 6532, National Bureau of Economic Research, Inc.
  15. Amanda Gosling & Stephen Machin, 1994. "Trade Unions and the Dispersion of Earnings in British Establishments, 1980-90," NBER Working Papers 4732, National Bureau of Economic Research, Inc.
  16. Patricia Tracy Jones & Stephen Nickell & Glenda Quintini, 2000. "A Picture of Job Insecurity Facing British Men," CEP Discussion Papers dp0479, Centre for Economic Performance, LSE.
  17. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, July.
  18. Rachel Griffith & Stephen Redding & John Van Reenen, 2000. "Mapping the two faces of R&D : productivity growth in a panel of OECD industries," LSE Research Online Documents on Economics 784, London School of Economics and Political Science, LSE Library.
  19. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc.
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  21. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, vol. 29(4-5), pages 449-469, April.
  22. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
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  24. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
  25. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
  26. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
  27. Chennells, Lucy & Van Reenen, John, 1997. "Technical Change and Earnings in British Establishments," Economica, London School of Economics and Political Science, vol. 64(256), pages 587-604, November.
  28. Nicholas Crafts & Mary O'Mahony, 2001. "A perspective on UK productivity performance," Fiscal Studies, Institute for Fiscal Studies, vol. 22(3), pages 271-306, September.
  29. Richard Kneller & Garry Young, 2001. "The New British Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 177(1), pages 70-84, July.
  30. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
  31. Desjonqueres, Thibaut & Machin, Stephen & Van Reenen, John, 1999. " Another Nail in the Coffin? Or Can the Trade Based Explanation of Changing Skill Structures Be Resurrected?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 533-54, December.
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