International Monetary Fund. External Relations Dept.
I n addition to providing a twice-yearly survey of global prospects and policies, the IMF’s World Economic Outlook includes analyses of selected topics of particular significance or interest. The recently published October 2001 World Economic Outlook takes an in-depth look at the information technology (IT) revolution. Although discussion of this important topic has been overshadowed by recent events (see IMF Survey, October 8, page 309), it is certainly a major development in the global economy, affecting all countries at all levels of development
This paper analyzes the welfare benefits from falling relative prices of IT (information technology) goods across a wide range of countries. We find, using two separate methodologies and datasets, that welfare benefits mainly accrue to users of IT, not their producers, because of falling relative prices. This is important, as IT production and use are highly differentiated across countries, and implies that earlier work on how IT production affects real GDP, while useful in calibrating the overall benefits of the IT revolution, are a less valuable way of assessing the distribution of benefits.