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International Monetary Fund. Asia and Pacific Dept

Globally, the COVID-19 pandemic and associated safe distancing measures have accelerated the digital revolution. A similar dynamic is taking place in Singapore, a country at the forefront of digital usage, including through unprecedented growth of e-commerce. An empirical analysis of sector-level labor productivity growth in advanced economies, including Singapore, suggests that digitalization and innovation, captured through e-commerce, robotization, and research and development, are associated with higher labor productivity growth. Singapore has scope for a sizeable expansion of e-commerce (despite recent rapid growth) and of research and development. This would help the country further reap the benefits of the digital economy, notably through higher productivity growth, and accelerate economic transformation.

Lahcen Bounader, Nikolay Gueorguiev, Ryota Nakatani, and Luis-Felipe Zanna

Many studies predict massive job losses and real wage decline as a result of the ongoing widespread automation of production, a trend that may be further aggravated by the COVID-19 crisis. Yet automation is also expected to raise productivity and output. How can we share the gains from automation more widely, for the benefit of all? And what are the attendant equity-efficiency trade-offs? We analyze this issue by considering the effects of fiscal policies that seek to redistribute the gains from automation and address income inequality. We use a dynamic general equilibrium model with monopolistic competition, including a novel specification linking corporate power to automation. While fiscal policy cannot eliminate the classic equity-efficiency trade-offs, it can help improve them, reducing inequality at small or no loss of output. This is particularly so when policy takes advantage of novel, less distortive transmission channels of fiscal policy created by the empirically observed link between corporate market power and automation.

Lahcen Bounader, Nikolay Gueorguiev, Ryota Nakatani, and Luis-Felipe Zanna
Mr. Andrew Berg, Lahcen Bounader, Nikolay Gueorguiev, Hiroaki Miyamoto, Mr. Kenji Moriyama, Ryota Nakatani, and Luis-Felipe Zanna