Work in Progress:

Last updated: 20/04/2009

Information and Communication Technologies in a Multi-Sector Endogenous Growth Model

This paper investigates the impact of Information and Communication Technologies (ICT) on growth in an economy consisting of three sectors, ICT-producing, ICT-using and non-ICT-using. It shows how the goods flows across sectors play a crucial role in transmitting the ICT growth to the rest of the economy. Its mechanism highlights the indirect benefits from ICT. These come from the falling prices of the ICT-using goods that cause investment incentives and thereby growth in the sectors using them as inputs. The paper shows that this mechanism is endogenously sustained on a constant growth path, where growth rates across sectors differ. Due to its analytical framework, the model captures important aspects of the U.S. growth experience. Its predictions on sectorial allocations of labour are consistent with the U.S. evidence. (pdf)

status: under review

March 2008  extended version (pdf)

August 2006 version: Centre for Economic Performance Discussion Paper No. 750 Extension: Transition dynamics (pdf)

Can optimism about technology stocks be good for welfare? Positive spillovers vs. equity market losses (with Katrin Tinn)

This paper shows how equity overpricing can increase aggregate welfare. When equity prices affect incentives for R&D investment, overpricing causes short-term negative NPV investments at the firm level and equity losses for investors. However, it also causes permanent output and wage gains, due to knowledge spillovers in R&D production. When overpricing is sufficiently small and lasting, wage gains compensate for losses from equity holdings and cause a Pareto improvement. This is because overpricing, at least temporarily, alleviates underinvestment in R&D at the aggregate level. The market fails to do so otherwise, due to incomplete ownership rights on R&D products.  (pdf)

status: under review

Earlier versions are titled: "Equity mispricing and R&D Growth"

Structural Change in Intermediates' use in the United States

This paper establishes a new fact of structural change for the United States economy in relation to its services-sector growth. The investigation of the United States patterns of intermediates use in the post-1970s period reveals a continuous substitution of the goods-intermediates with the services ones in the gross output of the average industry. The paper sheds further light into the role of the services-sector’s relative low productivity for the “Baumol’s cost disease” at the aggregate level. The results suggest that important drivers of the structural change are the increasing relative prices of the services-intermediates together with the complementarity between the two types of intermediates in production. The analysis concludes by presenting the aggregate impact of the structural change on input use and productivity and using its results to make projections for the impact of structural change over long horizon.

Full version soon!

Earlier vesrion is titled: "Patterns of intermediates' use in the United States and the United Kingdom" (pdf)

Patterns in Intermediates' Use: A Comparative Study Between the Europe and the United States.

This project proposes an in-depth investigation of the patterns of intermediates' use across Europe and the United States. This study is motivated from the empirical regularity that there is there is substitution of the goods-intermediates with the services ones in the gross output of the average industry of the United States and the United Kingdom.  the  The goal of the present project is to extend the original analytical framework and sample of study, in order to achieve a thorough understanding of the factors driving the observed patterns. The main objective is to examine the role of these structural change trends for the aggregate economic performance. A theoretical model will provide the appropriate framework for the empirical study. The data analysis of Europe, and in particular the new member states, is bound to enrich the conclusions regarding the role of institutions in industries' input choices.

Project granted from GDN

Productivity Gains and Services Liberalization in Europe (with Jan Bena and Peter Ondko)

The EU-level policy dictating the liberalization of the highly regulated and segmented services continues till today with the expectation that it leads to significant productivity gains. The investigation of the actual size and main sources of these productivity gains is therefore to the interest of both academics and policy makers. The proposed project intends to exploit the policy-induced telecommunications deregulation wave across European countries, to examine the causal impact of product market regulation on intra-industry allocation of resources and market selection in the telecommunications industry itself, as well as in other industries. Identification of the latter relies on the interrelatedness of different industries via their intermediates usage. If upon their liberalization telecommunications services costs had dropped, this would have affected various performance measures of industries and their firms. This framework will be used also to study the importance of institutions for the size of productivity gains from telecommunications liberalization and thereby provide policy implications.