Essays on information and communications technology, structural change, and economic growth

Over the past few decades technology has been a source of profound economic transformation. This dissertation is a collection of essays concerning the key features of the process. The work extends traditional macroeconomic growth models to better describe and quantify the reorganization of production associated with the information and communications technology (ICT) revolution and the structural change accompanied by technological progress. Furthermore, it seeks new ways to analyze the economic impact of the policy changes involved in the transformation. The first essay concerns the dynamics of ICT adaptation and the productivity gaps across advanced nations. Recent productivity statistics suggest that the ICT revolution is accompanied by widening productivity gaps. They may reflect differences in countries ability to make complementary innovations in organizations to foster successful adaptation of the technology. The essay provides an elaborate theoretical description of the productivity impacts of ICT adaptation, when complementary innovations exist. It suggests that the use of standard methods may lead to underestimate the role of ICT in generating productivity gaps. Instead, this paper uses an alternative labor productivity growth factorization and finds that ICT has a significant role in generating productivity gaps across advanced countries. The second essay studies structural changes and economic growth in the knowledge economy with a multi-sector dynamic general equilibrium growth model. The essay finds that ICT has a large role in determining long-term economic growth (40.9 percent in Finland). Furthermore, the analysis suggests that the growth rate of the economy remains stable despite large differences in sector-specific trends in technology due to the input-specific nature of ICT. The essay also finds that drivers of structural changes in consumption, value added, and hours have different origins. The third essay considers the collapse of the Finnish investment-led growth policy as a contributing factor to the Finnish Great Depression of the early 1990s. The policy change is analyzed with a dynamic general equilibrium model as a lifting of an investment-tax credit. The paper finds that the constructed policy change helps the model to replicate the depth and the persistence of the Finnish crisis in terms of a fall in employment, output, and investment. A reasonably sized financial crisis alone cannot explain the contraction and largely fails to account for the following long slump.