Innovation and Economic Development

Innovation and Economic Development

The Impact of Information and Communication Technologies in Latin America

Edited by Mario Cimoli, André A. Hofman and Nanno Mulder

Information and communication technologies (ICT) are spreading fast across Latin America and the Caribbean. This trend has brought about important economic and social changes, which have largely gone unmeasured until recently. Here, analysts from the United Nations Economic Commission for Latin America and the Caribbean along with other distinguished scholars in the field of ICT, growth and productivity provide theoretical and empirical insights to the debate on the role of ICT in economic development.

Chapter 1: Latin America and the World Economy

Dale W. Jorgenson and Khuong Minh Vu

Subjects: development studies, development studies, economics and finance, economics of innovation, innovation and technology, economics of innovation, technology and ict


* Dale W. Jorgenson and Khuong Minh Vu INTRODUCTION 1 The purpose of this paper is to analyze the impact of investment in information and communication technologies (ICT) equipment and software on the recent revival of growth in Latin America and the world economy. The crucial role of ICT investment in the growth of the US economy has been thoroughly documented and widely discussed.1 Jorgenson (2001) has shown that the remarkable behavior of ICT prices is the key to the understanding of the US growth resurgence since 1995. This behavior can be traced to developments in semiconductor technology that are widely understood by technologists and economists. Jorgenson (2003) has shown that the growth of ICT investment jumped to double-digit levels after 1995 in all the G7 economies – Canada, France, Germany, Italy, Japan and the United Kingdom, as well as the United States.2 These economies account for nearly half of world output and a much larger share of world ICT investment. The surge of ICT investment resulted from a sharp acceleration in the rate of decline of prices of ICT equipment and software. Jorgenson (2001) has traced this to a drastic shortening of the product cycle for semiconductors from three years to two years, beginning in 1995. Our methodology for analyzing the sources of growth is based on the production possibility frontier (PPF),3 which describes efficient combinations of outputs and inputs for the economy as a whole, which takes the form: Y 5 A.f (K, L) , (1.1) where Y is aggregate...

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