Digitalization and economic growth in the new classical and new structural economics perspectives

Abstract

This paper introduces ‘data elements’ into a neoclassical general equilibrium model and the new structural general equilibrium model to study the choice of economic growth paths for developing countries. It derives and compares a general expression for the economic growth rate in equilibrium within the two analytical frameworks following the introduction of digital development comprising primarily the data elements. Additionally, the optimal economic growth path for developing countries before and after the introduction of data elements under both frameworks is identified with important policy implications regarding direct technological progress with respect to the two alternative general equilibrium frame works. This study finds that: (1) No matter what kind of general equilibrium corresponding economic growth path the developing countries choose, the economic growth rate after the introduction of data elements will always be higher than before. (2) Developing countries find the optimal path of economic growth by comparing the different results of economic growth rates under the two analytical frameworks. This paper aligns with a view that when developing countries choose the path of economic growth, they need to combine their own endowment conditions and choose a new structural economics analysis framework for decision-making.