Multi-Sectoral Value Chain in a Bilateral General Equilibrium

Discussion Papers

No.691

by Satoshi Nakano,Kazuhiko Nishimura and Jiyoung Kim

February 2018

ABSTRACT

The information and communication technology (ICT) is a key engine of economic growth. In this paper, we examine the impact of ICT innovation using a multifactor constant elasticity of substitution (CES) general equilibrium model. Innovation not only leads to productivity growth and thus influence prices, it also changes output and trade patterns, and welfare. To examine trade values, we construct a bilateral multifactor CES general equilibrium model between Japan and the Republic of Korea using linked input–output tables. We estimate elasticities of substitution and productivity growths of the ICT sectors, to assess the effects of ICT improvement on the two countries.

Keywords:  Linked Input–Output Tables, Information and Communications Technology, Tracing Elasticities

JEL classification: C67, D57, D83, F19

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