Go to the Mian menu
Go to the Mian menu

Research ReportsKIET Korea Institute for Industrial Economics and Trade

  • home
  • Publications
  • Research Reports

An Analysis of the Economic Effect Resulting from New Technology Convergence

Author Dong-Hyeok Suh, Won-shik Hwang, Sang-hun Kim, Seung-min Kim, In-ha O Date 2016.02.01 Page 16
File pdf
Recently, the global economy has entered a period of low growth?the so-called “New Normal” era?not only for the advanced economies, but also for the developing nations, the latter having previously achieved rapid growth. Under the circumstances, many countries, including Korea, have been paying close attention to the trends toward convergence and fusion within the field of information and communications technology (ICT). In many previous studies, ICT has been defined as a general-purpose technology; indeed, numerous examples of empirical research have shown that ICT influences productivity in other industries and fuels innovation. In view of this, ICT convergence may be said to represent a strategy for generating added value in a wide range of industrial areas.
As a foundation for the creative economy, ICT has an influence that spans all areas of industry, with effects on the national economy that follow three specific channels. First, rapid developments in ICT have led to total factor productivity rising at a faster rate in ICT manufacturing than in other industries; this, in turn, has helped power productivity growth for the economy as a whole. Second,
falling prices of ICT products have led to an increase in ICT investment; while ICT capital goods, which exemplify advances in technology, have come to substitute for other production input factors.
In other words, inputs of ICT equipment, which is somewhat more efficient than existing non-ICT capital goods and human labor,
have led to an increase in production efficiency in a phenomenon known as “ICT capital deepening.” Third, ICT has long been fused with other industries as a general-purpose technology, resulting in greater efficiency in the production process and helping to promote innovation in other industries.
This study seeks to analyze ICT convergence from a different perspective. First, it considers the characteristics specific to ICT convergence and comparatively analyzes its aspects vis-a-vis those of other examples of technology convergence, including nano- and biotechnology. A conceptual framework along these lines is also presented at the end of the report. Another aim is to gauge the impact of ICT convergence on economic development in Korea and offer a quantitative analysis of its anticipated future effects. Specifically, growth accounting methods are applied to analyze the extent to which ICT has helped boost economic development and productivity. (Growth accounting is an approach that is widely used to analyze the influence on productivity of different factors input during the production process.) These findings are then used to develop a computational general equilibrium model to forecast the future economic impact of ICT convergence and conduct a preliminary analysis of hypothetical policy approach scenarios. It is hoped that the model developed here can eventually be refined to permit a range of policy experiments.