ICT, the New Economy and Growth: The Potential for Emerging Markets

Abstract

There is a consensus view that, since the mid-1990s the US has created a ‘New Economy’ based on the rapid deployment and widespread utilization of new information and communications technology (ICT) and by advances in computing and information management that caused a structural acceleration in labor productivity and output growth (Jorgenson and Stiroh 2000, Salvatore 2003).1 The term New Economy is intended to capture the role of this new technology in contributing to the non-inflationary growth and high employment that characterized the period (Jorgenson and Wessner 2002).2 The rapid rate of technological innovation in ICT and the rapid growth of the Internet are seen as underpinning such productivity gains (Jorgenson and Wessner 2002). Gains are derived from greater efficiency in the production of computers and from the expanded use of ICT (Onliner and Sichel, 2000). Structural change has also arisen from the reconfiguration of knowledge networks and business patterns made possible via ICT innovation. For example, business-to-business e-commerce and Internet retailing are altering how firms and individuals interact to enable greater efficiency in purchasing, production processes and inventory management (Jorgenson and Wessner, 2002). Panagariya (2000) claims the transfer of ICT, in particular Internet technology, to developing countries enables the leaping of technological stages and provides a basis to enhance macroeconomic growth. Conversely, unless ICT is widely adopted, developing countries are likely to remain unable to compete in the New Economy where the sources of advantage are high knowledge-intensity and the fast adoption of new technological innovation, not low-cost factor advantage (OECD 2000).