Information Technology, Globalization, And Growth: Role For Scale Economies, Terms Of Trade, And Variety
This paper considers three channels through which globalization of information technology products may affect economic growth: terms of trade in IT products in international trade, economies of scale in IT production and trade, and variety in IT consumption and trade. The empirical question relevant for policy makers is, what is the relative magnitudes of these channels. To catalyze economic growth and enhance performance, should policymakers promote IT exports to exploit economies of scale in production? Or, should they promote imports and domestic consumption of a variety of IT products to gain from falling IT prices, get more variety, and through these channels support faster TFP?