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A CGE Analysis of the Potential Impact of Information Technology on the Japanese Economy

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  • Piyush Tiwari
  • Masayuki Doi
  • Hidekazu Itoh

Abstract

In this paper we investigate the potential system-wide impact of information technology on the Japanese economy using a static computable general equilibrium model with base case calibrated for the year 1995. The information technology has two potential impacts: (1) it enhances the labour productivity, and (2) e-commerce improves the efficiency of marketing and reduces the cost of marketing, typically referred as "marketing margins" in the literature. There is a growing interest among policy makers in the impact of information technology on Japanese economy. The effect of e-commerce on the economy is through reduction in cost of B-to-B and B-to-C transactions. An existing estimate of the reduction in price due to the penetration of e-commerce in different sectors in Japan indicates that there is a possibility of price reduction between 1.39 percent in the automobile sector to 0.65 percent in the machine equipment sector and so on. Our model simulates the penetration of e-commerce in the Japanese economy, which will reduce market margins through direct selling on the Internet or the like. The results overall indicate that e-commerce has positive welfare benefits for consumers and that it also leads to structural changes in the economy. On top of this we impose IT-led, Harrod-type labour productivity gains and the results indicate that the Japanese economy would have large welfare gains through the penetration of IT into various sectors of the economy.

Suggested Citation

  • Piyush Tiwari & Masayuki Doi & Hidekazu Itoh, 2003. "A CGE Analysis of the Potential Impact of Information Technology on the Japanese Economy," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(1), pages 17-33.
  • Handle: RePEc:taf:jpolrf:v:6:y:2003:i:1:p:17-33
    DOI: 10.1080/13841280309601
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    References listed on IDEAS

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    1. Scott Bradford & Alexandre Gohin, 2006. "Modeling Distribution Services and Assessing Their Welfare Effects in a General Equilibrium Framework," Review of Development Economics, Wiley Blackwell, vol. 10(1), pages 87-102, February.
    2. repec:wsi:wschap:9789812701350_0018 is not listed on IDEAS
    3. Sasaki, Kozo, 1996. "Consumer demand in Japan: An analysis using the Deaton-Muellbauer system," Japan and the World Economy, Elsevier, vol. 8(3), pages 335-351, September.
    4. H. Uzawa, 1961. "Neutral Inventions and the Stability of Growth Equilibrium," Review of Economic Studies, Oxford University Press, vol. 28(2), pages 117-124.
    5. Dirk Pilat, 1997. "Regulation and Performance in the Distribution Sector," OECD Economics Department Working Papers 180, OECD Publishing.
    6. Thomas W. Hertel & Terrie Walmsley & Ken Itakura, 2005. "Dynamic Effects Of The "New Age" Free Trade Agreement Between Japan And Singapore," World Scientific Book Chapters,in: Quantitative Methods For Assessing The Effects Of Non-Tariff Measures And Trade Facilitation, chapter 18, pages 483-523 World Scientific Publishing Co. Pte. Ltd..
    7. Pohjola, M., 2000. "Information Technology and Economic Growth. A Cross-Country Analysis," Research Paper 173, World Institute for Development Economics Research.
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    Cited by:

    1. Zhang, Pengcheng & Peeta, Srinivas, 2011. "A generalized modeling framework to analyze interdependencies among infrastructure systems," Transportation Research Part B: Methodological, Elsevier, vol. 45(3), pages 553-579, March.

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    Keywords

    Information Technology; Japan;

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