The productivity and unemployment effects of the digital transformation: an empirical and modelling assessment

For the last 30 years, the economy has been undergoing a massive digital transformation. Intangible digital assets, like software solutions, Web services, and more recently deep learning algorithms, artificial intelligence, and digital platforms, have been increasingly adopted thanks to the diffusion and advancements of information and communication technologies. Various observers argue that we could rapidly approach a technological singularity leading to explosive economic growth. The contribution of this paper is on the empirical and the modelling sides. On the empirical side, we present a cross-country empirical analysis assessing the correlation between the growth rate of both tangible and intangible investments and different measures of productivity growth. Results show a significant correlation between intangible investments and both labor and total factor productivity in the period after the 2008 financial crisis. Similarly, both measures of productivity growth are correlated with a combination of both tangible and intangible investments which include information and communication technologies and software and database. These results are used to inform the enrichment of the agent-based macro-model Eurace that we employ to assess the long-term impact on unemployment of digital investments. Computational experiments show the emergence of technological unemployment in the long run with a high pace of intangible digital investments.