nep-ict New Economics Papers
on Information and Communication Technologies
Issue of 2024‒04‒15
eight papers chosen by
Marek Giebel, Universität Dortmund

  1. Learning along the Digital Silk Road? Technology transfer, power, and Chinese ICT corporations in North Africa By El Kadi, Tin
  2. The Impact of Municipal Broadband Restrictions on COVID-19 Labor Market Outcomes By Saket S. Hegde; Jessica Van Parys
  3. Changes and Implications of China’s High-tech Industry Development Policy after the US-China Conflict By Cho, Eun Kyo
  4. Employer Market Power in Silicon Valley By Matthew Gibson
  5. The Ecosystem Approach to Entrepreneurship Policy in the Digital Era By An, So Hyun
  6. Digitalization, Entrepreneurship, and Wealth Inequality By Ichiro Muto; Fumitaka Nakamura; Makoto Nirei
  7. Banks' operational resilience during pandemics By Cristina Demma; Giovanni Ferri; Andrea Orame; Valerio Pesic; Valerio Vacca
  8. Digitalization, Decentralization and a Culture of Learning: Sowing the Seeds for Effective and Sustained Public Sector Rightsizing By Ronald Mendoza; Alex Brillantes; Miguel Paje; Ainna Comia; Karl Emmanuel Ruiz; Edilberto C. de Jesus

  1. By: El Kadi, Tin
    Abstract: While much attention has been paid to how China’s rise as a digital superpower could threaten US hegemony over cyberspace, much less has been written on what the Digital Silk Road, or the presence of Chinese tech firms in developing countries more broadly, means for technological upgrading and development. This article contributes to filling this gap by investigating the technology spillovers emanating from two Chinese tech giants – Huawei and ZTE – in Algeria and Egypt. Using a political economy framework that combines insights from structuralist economic development and techno-politics and drawing on over 70 semi-structured interviews and field-observations, it argues that despite localizing activities that bear the promise of generating significant linkages, the two Chinese tech firms created no meaningful learning opportunities for domestic entities that contribute to technological upgrading. What could at first seem like developmental connections that promote technology transfers are found to be linkages diffusing Chinese infrastructures, hardware, software, processes, and standards that shape distinct digital systems. Without pro-active policies from host governments, the Digital Silk Road risks creating new technological dependencies; locking local ICT actors into activities and relationships captured and defined by Chinese tech giants.
    Keywords: Algeria; Chinese ICT firms; digital transition; Egypt; linkages; technology transfer; techno-politics; Faculty of Humanities; T&F deal
    JEL: R14 J01
    Date: 2024–02–29
  2. By: Saket S. Hegde; Jessica Van Parys
    Abstract: The COVID-19 pandemic initiated a trend in “work-from-home (WFH), ” but workers need reliable and fast internet connections (e.g., broadband) to work from home. Yet, as of January 2020, 18 states had legally restricted local governments and cooperatives from building their own broadband infrastructure and/or providing broadband internet to their communities. Such policies reduced broadband access and competition in states with restrictions compared to states without restrictions leading up to the pandemic (Whitacre and Gallardo 2020). We use CPS data from 2018-2023 to estimate a dynamic difference-in-differences model that shows how labor force participation (LFP) rates changed in states with and without broadband restrictions, before and after the COVID-19 pandemic. We focus on married women with children, a population with more elastic labor supply that may especially value the flexibility that WFH offers (Dettling 2017). We find that married mothers’ LFP and employment decreased by 1.7% and 2.2%, respectively, in states with restrictions after the pandemic compared to states without restrictions. Labor force outcomes for women without children and married men with children were unaffected by broadband restrictions. The results suggest that married women with children were less able to remain in the workforce in states where their ability to WFH was limited by broadband restrictions.
    JEL: J2 K2 L86
    Date: 2024–03
  3. By: Cho, Eun Kyo (Korea Institute for Industrial Economics and Trade)
    Abstract: Since the 2010s, the Chinese government has promoted its high-tech industries through the Strategic Emerging Industries and China Manufacturing 2025 policies, among others. It has focused on cultivating the next-generation information technology (IT), biotechnology, new energy vehicles, and new materials industries, and investment is being funneled to these sectors in an effort to secure engines of future growth. Specific measures include subsidies, R&D support, and human resource development, but the most important feature of the Chinese policy stance is the government’s use of subsidies to create drive supply and demand in the market and build an industrial ecosystem. However, the US sanctions regime targeting the Chinese technology sector threatens to derail China’s efforts to foster its high-tech industries US technology sanctions against the country. While the country has successfully formed companies and markets have through subsidies and aggressive mergers and acquisitions (M&A), Chinese tech firms are heavily dependent on the US and EU for so-called “choke point” technologies, such as semiconductors; American semiconductor export controls and investment bans have had a significant impact on China’s high-tech industries and its science and technology (S&T) policies. In this paper I examine the characteristics of China’s high-tech industry development and S&T strategies and describe changes to Chinese policy following the eruption of the US-China dispute. I specifically analyze how China has promoted industries and technologies in the past, focusing on high-tech industries such as semiconductors and batteries, and review the evolution of Chinese policy since the beginning of the US-China conflict.
    Keywords: US; China; US-China conflict; high-tech industry; information technology; IT; semiconductors; chips; batteries; electric vehicles; EVs; economic security; economic nationalism; choke point technology; Chinese policy; Chinese technology policy; Korea; KIET
    JEL: F51 F52 L52 L63 L65
    Date: 2024–02–29
  4. By: Matthew Gibson (Williams College and IZA)
    Abstract: Adam Smith alleged that employers often secretly combine to reduce labor earnings. This paper examines an important case of such behavior: illegal no-poaching agreements through which information-technology companies agreed not to compete for each other’s workers. Exploiting the plausibly exogenous timing of a U.S. Department of Justice investigation, I estimate the effects of these agreements using a difference-in-difference design. Data from Glassdoor permit the inclusion of rich employer- and job-level controls. On average the no-poaching agreements reduced salaries at colluding firms by 5.6 percent, consistent with considerable employer market power. Stock bonuses and job satisfaction were also negatively affected.
    Keywords: No-poach agreement, employer market power, Silicon Valley, tech companies, Glassdoor, compensation
    JEL: J42 K42 L41 K21
    Date: 2024–03
  5. By: An, So Hyun (Korea Institute for Industrial Economics and Trade)
    Abstract: The COVID-19 pandemic accelerated the digital transformation and affected entrepreneurial environment. Innovation is becoming more important than ever amid the digital transformation of society, and the role of start-ups in innovation has become especially vital, especially as a means of recovering from the economic shock of the COVID pandemic. The digital transformation and the importance of start-ups in economic development and recovery raise questions concerning the direction of entrepreneurship policies in the digital era. This paper explores these questions, probing the relevant academic literature in search of answers. I focus on entrepreneurship policies from an ecosystem perspective and these policies’ importance in the digital era. First, I illustrate the concept of the entrepreneurial ecosystem by summarizing main components as described in the literature. While the body of scholarship on regional economics and entrepreneurship has sought to provide a definition of the concept, the theoretical framework remains a matter of debate. Next, focusing on the role of digital technology as a both a context and enabler of the entrepreneurial ecosystem, I discuss the changes digital transformation has wrought and the growing importance of adopting an ecosystem perspective in entrepreneurial policies in the digital era. Finally, I suggest potential directions for entrepreneurship policies in the digital era by linking them to the characteristics of entrepreneurial ecosystem.
    Keywords: entrepreneurship; digital platforms; digital transformation; digital companies; innovation; startups; venture firms; entrepreneurship policy; regional economics; regional innovation; digital technology; Korea; KIET
    JEL: L26 R10 R11 R58
    Date: 2024–02–29
  6. By: Ichiro Muto (General Manager, Aomori Branch, Bank of Japan (E-mail:; Fumitaka Nakamura (Director, Institute for Monetary and Economic Studies, Bank of Japan (currently, International Monetary Fund, E-mail:; Makoto Nirei (Professor, Graduate School of Economics, University of Tokyo (E-mail:
    Abstract: What are the main drivers of the recent increase in wealth concentration in the U.S.? This paper quantifies the role played by digitalization using a tractable model with heterogeneous agents with risk aversion. The model combines (1) digital capital that substitutes for labor in the production process and (2) households' investments in risky digital assets to replicate the asset growth of the wealthy since the 1990s. In the equilibrium, a small number of prosperous households with low risk aversion, i.e., digital entrepreneurs, hold most of the risky digital capital, whereas a large number of risk-averse households rely mainly on labor income. Hence, when digitalization advances, these risk-tolerant households enjoy higher returns from digital capital, further accumulating digital capital disproportionately. Based on the model calibrated to the U.S. economy, we show that digitalization (an increase in digital productivity by 21-43 percent) has contributed to more than about 50 percent of the increase in the share of wealth of the top 1 percent of households and more than about 80 percent of that of the top 0.1 percent of households observed over the last 30 years. Moreover, it explains about 20-40 percent increase in the annual savings of the top 1 percent of households. Finally, the comparative statics on the macroeconomic variables show that while advances in digitalization decrease the labor share by 3-5 percentage points, which is in line with the empirical literature, it also increases wages, meaning that risk- averse households, who rely mainly on labor earnings, also gain some benefits from digitalization.
    Keywords: Digitalization, Entrepreneurship, Wealth inequality, Savings inequality
    JEL: E21 E22 E24 E25
    Date: 2024–03
  7. By: Cristina Demma (Bank of Italy); Giovanni Ferri (Lumsa); Andrea Orame (Bank of Italy); Valerio Pesic (Universita' La Sapienza); Valerio Vacca (Bank of Italy)
    Abstract: Using the unanticipated and exogenous Covid-19 shock as a unique laboratory, we address the topic of business continuity at banks, where limitations to social mobility hindered the provision of branch-executed services. Namely, we conjecture that business resilience was higher if a bank had previously invested heavily in IT to increase its degree of digitalization, shifting more customers from branch- to online-executed services. In particular, we speculate that such investments should unfold greater readiness in migrating retail customers towards online payments during the pandemic, confirming that IT investments contribute to operational resilience. Exploiting thinly disaggregated supervisory data, our empirical analyses provide robust support to our hypothesis. Hence, digitalization seems to breed resilience at banks against unforeseen natural events; this corroborates the usefulness of technological investments also as an insurance against unpredictable risks and indirectly confirms the complementarity of the twin Green-Digital transition.
    Keywords: innovation, Fintech, banks, bank credit transfers, payment habits, Covid-19 pandemic
    JEL: E41 E42 D12 G21
    Date: 2024–03
  8. By: Ronald Mendoza (IDinsight); Alex Brillantes (University of the Philippines Diliman); Miguel Paje (ACERD); Ainna Comia (ACERD); Karl Emmanuel Ruiz (ACERD); Edilberto C. de Jesus (Asian Institute of Management)
    Abstract: In the Philippines, the strengths and weaknesses of both the central and local bureaucracies have been revealed by the recent pandemic, encompassing coordination hurdles, limited capacities, complex partnerships, data deficiencies, and the imperative of digitalization. With the nation striving to build back better after the pandemic, calls for public sector reform— and the need to rightsize the government—reflect the increased urgency for more effective and improved provision of public services. Government rightsizing can be understood to reach the end goal of better provision of public services—guided by answering the inter-related questions of What to produce, How to produce and For whom to produce these public services. Hence, rightsizing may entail expanded public sector investments and activities in some key areas, and rationalization and streamlining in others. Rather than produce yet another rightsizing study recommending specific spending cuts and rationalization, and investments, this paper takes a different approach by focusing on the bigger picture of government rightsizing in the Philippines. It reviews the literature and policy experience on rightsizing, as well as the emerging enabling conditions for this. It supplements this broad review with key informant interviews in order to develop a proposed policy framework (along with an operational guide) for organizing more effective and sustained rightsizing in the Philippine public sector, offering guidance and insights to legislators for finalizing (and implementing) the House Bill No. 7240 which shall be known upon enactment as the National Government Rightsizing Act. The goal here is to see beyond the immediate details of individual agencies, projects and programs that require rightsizing analysis—rather to look at the broader canvass of the role of the State and way reformists have approached the rightsizing agenda. With a focus on the national government, this paper argues that in order to set the stage for more effective and sustained rightsizing, reformists need to take a step back and support some key enablers and possible game-changers, such as digitalization, the present impetus of decentralization, and a culture of learning with strong monitoring, evaluation, and data-enabled decisionmaking. There are key legislative reforms under the Marcos administration (with attendant budgetary implications) along these lines, which this paper supports with evidence and specific policy recommendations.
    Keywords: government rightsizing, digitalization, decentralization
    JEL: H11 H77 O1 P0
    Date: 2024–03

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