The Global Impact of Information Technology

1. INTRODUCTION institutional changes that will accompany it\

diffusion, and that this might be ;I “poocl thing”
Of the many tcchnologics which ;ux now being since the poorer countries have much more
intrducetl into the global economy. information immediate and serious problems to confront. The
technology is anion, 0 the most controversial. It difficulty with this conclusion is that. in practice.
ha raised hopcs of ;I more qu;~l compc‘tition on the impact\ of nt’w tcchnolugy will be felt by all
international mar!+%. liowcvcr. it poxs serious countries. whether or not they actually adopt
qucstwns iii ~111 countries about the futurt‘ trend5 new technologies. The few national studies which
in cmplo);mcnt xd incomc di~tributiun. The have esplorccl international effects conclude that
iauc’ of ciiip’lo~mcnt has been dclrc5wd at “national ~~uthorities should primaril! be wrriccl
scvcral levels. The majority of studies es;lminc’ ;IboLlt competitive price pressure5 from
the impact on particular cnterpriscs or inclustrics. tcchnologicdly superior compctitor3 abroad”
Scvcral studies have attcmptcd to xw5s thu (Rathenau, 19S1). hlore grncrally. the conclu-
impact on national cconomit’s. u5itig data based sions of mwxwxxiomic studies tend to retlect
on scctoral stuclics. l‘hcsc studies have dealt Lvith national circumstances: whc’rc national pcrforni-
the situation in indu5trid economit’s, although ante has been rclativcl> good by world ~tanclarcl~
increasing attt’ntion i3 now focused on the the conclusions emph;lsizc the job-creating
implications for dc\eloping cconomie>. This effects of information tschnology and Lice versa
paper lookx at the posGbk impact of new tcch- (Freeman and Swte. 1YS.S). Indeccl. information
nology on cmploymcnt and distribution within ;I technology is likely to acccleratc the integration
global framework. and focwcs particular attt’n- of the global economy and sped up the tranw~is-
tion on the impIicxtions of diffcrcnt patterns of sion and response to change. Thus it ih unlikeI>
twhnolo$cal diffusion on the Ica\t industrialized that the leaht cl~velop~d countries. or any others.
developing countries. will be insulated from the conqwnces of
The importance of this is the following. First, technical ch;In”c.
3
as ;I recent review (I Hoffman. I9S5) observes. the
studies of nt’w technolofie5 in develq~ing coun-
tries have conccntrxttxi on the Gtuation of the
navly industrializecl countries xd the implica-
tion5 for the Ieast industrial countriu5 have been
h;lrdlv adclresscd at all. From this, it is argued
that ;hese countries m;iv tx little affectal by
microelectronics tcchnol;gy or the wcial and

1’777
 The potc’ntial impact of nc‘w tcchnololrv 3. is
thcrefortr very great. On the other hand. within
specific sectors the rate of adoption of nc‘u
technologies depends on particular factors such
35 skill5 shortages. lack of findncc, or
incompatibilit) with esisting irifr;i\tructureS.
Ovcrconiing these oh5taclcs and rewl\ing the
outstanding technological problem determinc~
the paw at which information will he introduwd
in different sectors. The Icads to the idea that
there arc fairly distinct gerit2r;ition~ of informa-
tion technology. Thi> ih alr~xly suggested in
wveral ;irt’a of m~inuh~ctiiringi~ \I here the
introcluction c>f information technology has pro-
ceeded fxtcst (e.g. lkplinsky. 1’9S-l). These
wmt factor5 help to dctcrmine the p;~cc of
diffusion across countries. and impl\- that some
countric’s could continw to fwx partmlar prob-
Icms in acquiring and applying the nc’w tech-
nology (c.g. Boon. IYSZ).
One way to estimatt’ the paw of introduction
and owrall impact of information technology is
The term “information technology” lends itself to revie\v in detail the specific applications of the
 THE GLOB,\L I\fPr\C‘T OF 14FOR\l.-\-l‘IC)U TEClINOLOG\I’ I779

technology to date and then to attempt to make In each sector. the proportion of each sector
broad conclusions as to its present and future which is affected. the likely impact on both
diffusion across different sectors and countries. products and processes. the quantitative and
The available data are by no means ideally suited qualitative effects on employment. and the
for such an empirical analysis: the various sub- potential for capital baking. is estimated. For
sectors identified in the standard industrial reasons of space it is onI\ possible to illustrate the
classification (SIC). do not corrrtspond well findings here. but this demonstrates further the
between activities in terms of their propensity to kvide range of applications encompassed by the
use the new technology (see e.g. Riche t’r trl.. term “information technology.”
19S3). As noted above. this depends on the
information content of processes as lvrll as other
specifics such as the scale of production (Ayrrs
and Miller. 19S2). Severthekss. it is possible to
obtain a quantitative estimate of the impact of Within and across these sectors. there is
information technolopy on the aver+ labor considerable variation. Agriculture in the indus-
productivity. skill and capital intensity and so on trial countries has long been characterized bv
across sectors. which is sufficient for the calcula- extensive productivity improvements. and in-
tions reported in this paper. formation technologies are somewhat peripheral
The evaluation of data is carried out in two to this dominant trend towards the industrial-
steps: first the potential applications of informa- ization of the sector. Overall information tech-
tion technology are rrvieived on a sector by nology is expected to have a rather minor impact,
sector basis: and then the probability of different enhancing productivity by around 20%. In basic
kinds of eco~w~uy achieving this potential over industries. such as food processing, a fltir propor-
the next decade or so is assessed. tion of the sector may be affected. although
generally in marginal ways. The impact on
processing is mainly in finishing operations, such
as storage. packaging and distribution. \vith some
For the sector by sector review, the available improvement in product quality as a result. This
data are grouped into eight major sectors, which would however lead to job losses (as much as
arc subdivided into a total of 25 activities 80% in some activities) and a shift towards
according to the potential for use of information greater specialization. In intermediate manufac-
technologies (see Bessant ancl Cole. IYSS). These turing activities such as automobiles. the impact
are: on both products (lvith changes in driver
(i) agriculture (including fisheries md information and pollution control) and processes
forestry) (including vehicle design and ultimately. inte-
(ii) estractive industries (mining. quarry- srated tlcxible manufacturing) may be very
ing etc.) significant for some activities. Again. job losses
(iii) basic manufacturing (traditional in- in some activities, such as assembly and ware-
dustries such as textiles. foundaries. housing. may be as much as SO’% and generally of
food processing and simple chemicals) unskilled and semi-skilled jobs. and the
(iv) intermediate manufacturing (medium corresponding supervisory staff. In advanced
scale, medium technology sectors such manufacturing sectors. illustrated by industrial
215 consumer elrct~ical goods. and military electronics equipment, the overall
engineering) impact is likely to be very high with increasing
(v) advanced manufacturing (sectors sophistication of products. and major changes
based on. or about to oxpttrittnce a towards high volume automated modular assem-
major change, such as aerospace, elec- bly with very strict quality control. and an
tronics. pharmaceuticals, petro- increasing use of specialized skills.
chemicals and large scale process in- Within the service sector the potential impact
dustries) of information technology is equally varied.
(vi) utilities (power, communications etc.) Some activities. such as welfare services, hotel
(vii) basic services (traditional service ac- and cleaning services and education, can in
tivities with a high labor content such principle be “robotized.” Present trends suggest
as tourism. cat&ing, cleaning) that delivery of the service is likely to remain
(viii) advanced services (including sectors personalized, but with support and networking
v.ith xrov.ing sophistication in the activities such as planning and scheduling. record
services offered such as banking and keeping and so on increasingly being via informa-
retailing). tion technologies. Overall this implies a shift
 The potcntixlly nio\t important rt’\Lllt of inte-
gratd nutomxtion and the \vstCniic Ll\C of This 5LlnimLry merely outline> the potential
infnrmation techn~~log!. i\ thf2 oppclrtLlnitv for impact of information technology on procluc-
capital saving. For cwrnple. with nc\v tcchnolo- tivity. llo\vCvcr. from the sLLiii of available d:it;i.
cG’r it may be possIb1 r‘ to achieve rates of capital it is conclurl~d that there arc trends within all
utilization and flcsibilltv (ariGn< from rouncl-the- sc‘ctor5 toward; higher levels of intepration and
clock opt2ration arid much reduced reetting away from I;Lhor intensity, but with increasing
times) which erode traditional axmmi~~ of skill intt’mitv. This trcncl appears to be most
scale. The significance of this is that ;I high ad\~ancecl in the indLLstri:Ll sectors and lest
proportion of production in industrial countric‘s is advanced in a@LLlturc. The present trend in
prewntly carricrl out in batches of 50 itcm5 or most smXors i\ towards increased capital intent-
Icss. Taking sLidi po~~ibilitics into account c;Ln it!. although this COLIICI rcvcrse over the wst
rt’vt‘rx conclusions ;I\ to the long-term ~iiiplov- claxdc or $0 if application of inforrii~ition tcch-
ment effects of information technology. Ayrc5 riology transforms from ;I piecemeal activitv b!
and hlilkr ( IWZ), for ~uiiiple. show that if only acti\ ity ha&. into a mow “systemic” and inte-
the Iabor-sa\,irig aspects of nw metal \vorliiii$ b
wLtcd pattern.
tcchniquc5 arc taken into ;iccount. then there bill
be a net loss of job\ in that wctor. When the
potential for capital savings is ~~~sL~rii~d. this
conclusion is rcvcrkd Thee :LLithors sw this
change coming aboLL wcr the nest half century. The second step in the analysis is to c‘s;Lniinc
and other (e.g. Kaplimky. I9S-l) see the hO\V fdl and fat information technology i5
introduction of this factory 0-f the future cjiily hv diffusing in different countries. Enipiricalll;. thi5
the end of the centLir) and ;IS ;I second stage (Yf k more difficult. As the work of Lcontief amI
impl~mentatic,n after the procc5s and plant level Duchin ( IWS) shows. the process of obtaining
difficulties have been ironed oLlt. The timt’scalt accurate e5tini;ites in ;I cluantitativc form i\
for this is difficult to prtxlict because the capital estreinsly difficult even for a11 xivancd induk
co5t of moving to continLioLis and tlexible procluc- trial economy 4Llch as the United Statc’s. It i5
tion is cstrenwly high xnd to achieve full potcn- more difficult to judge the pace at bvhich informa-
tiaI rquircs the construction of totally new plant. tion tcchnokyy uill be transferred or innovated
rather than the upg;iLlin, 0 of existing cqLiipnient. in other Ic55 industrialized countries. Gcncr;ill>
The sytcmic effect5 of information technology data are mow patchy, although again wmc‘
may estcnd \r.c’ll bc)ond this. For esamplc. working t’stimatcs based on available: eCdcnce
information technology greatly changes the cm lx macle. For the moment, coLlntrics arc
potential mobility of service acti\‘itit’s \vith the tlividsd into three groups according to incoiiit’.
rcsult that wrvices arc far niorc cahilv traclctl lvith each group further subdivided according to
bet\veen nations. The>< same ch;Lnge.s i;i scrvicc the prcscnt level of industrializ~ition xirl the
activities affect the efficiency of rnmuf2ctL~ring potential application of information technology.
and similarly enable ;I mow txtrcme sepmtioii r ligh income countries:
hctwer‘n ni;in;igt‘mc‘iit ;ind production of m;inLi- (i) advanced industrial countrit’5 (C.S.
facturtx This obviousI\ has implications in terms United States. Japan)
of patterns of irikrnatmwl trade (sin02 services (ii) lagging industrial countries (c.g. United
art’ usudly t;ikt’n to he i~r~do~~iiii~liitl~ localized). Kin@m. France)
This globalizing trndmcy acts in opposition to (iii) centrally planned industrial countries
the localization implicit in the factory of the (e.g. Soviet Union. Poland)
the nicdiuni tcrni the most significant uw of the
technology will bc iii ttic cl) ndniic industrial
nations 5uch as Jxp;~n. but that there \$ill alw? bc
t’stensi\,e applications in the lagging indu\trial This ~~\erall picture is summarized in Table I
nations such a5 the United Kingdom. 2nd the which prexnt5 quantified r‘stimitcs of the t’Y-
industrial centrally plnnnecl cconaiiiie~ (ehpcci- pectecl shift5 in labor. capital and skill intcnsitk
all!, the So\.ict Union). The evidence is incon- acro5s sectors and countricb over the next decxi~
clusive a5 to whcthcr unbridpcabk paps ha\e or so. In each cat’ the cstimatt’ reflect5 :I
opt’ncd hct\vcen the industrial countric5 (we t‘.g. judgcnient bawd on a review of scctoral xd
Pxvitt. 19SO). The diffcrenccs bctivwri the indus- enterprise Ie\,el data to ascertain the share of
trial econoniic5 art’ gencrnllv Ices than those production in each sector \vhich could potentiali!
bstwwri these high inconit‘ cckntrit’s as 2 group be afftxtcd, ths change in Idxx. skill and capital
and the rat of the \vorld. intcwity and the rate at uhich the technology i>
Thew diffcrcnces may be btxwming Ia5 acutt’ king introduced. In this table (arid in subcc-
in wnic of the “ne\vlp iiitlust~i~lliz~c” c’coii~miic5 qucnt tables). the ostiniatcd impacts are ranked
(wch ;15 South Korea, Taiwan and Brazil) and on ;I scde from “nrgligihlc” to “wrv high”
capital-rich oil-exporting cconomic‘5 (such as assmkited Lvith correspondin, 0 numerical ranges.
~lt2sico and Saudi Arabia). which ccmpriw the This ;lIso give an i&a of the uncertainties in
“niidcllc inconic” group. Iri )rcvci-aI ;irc;L5 of these cstiniata. For example. the clisplacemcnt
maniifa~turing, a number of NIC5 arc alrext> of unskilled I~ihor (for ;i given output) i5 espwtcd
exploiting present gencration5 of iiiforni:itioii to average bctwc‘cn 21) and 30%. de5ignatcd as
technology xiid thi5 tcndcnq i5 likely to cm- “m~~litlrn-higti” or “Ml I” in Table I Bscausc the
tinuc. In the NlCs ths xrvicc sector ih grooving tendency towards “s):stemic” technologies (i.e.
rapidly and thors appcar5 to be con5itlerablc capital and intcrniccliatc input saving) is coii-
potential for the application of information tech- siclcrcd a5 ;I scconcl stage in the introduction of
nc)logy. Unlike iii~inllfacttiririg technology there iiiforrii;ition tcchnolo$es. and is also less curtain
appc;ir to bc fewer harricr5 to entry. and sonic of to conic about, it i5 shum ii separately. Its impact
the richer developing countries (in particular. oil will ;IISO be considered separately in the c~lculx-
csportcr5) have alrcxiy purchxwi facilities tions bclmv. Inwfar a5 there is uncertainty about
ivhich arc more aclvancccl than those‘ in man> the trends sugysttd hv the data or time hor-
industrial ccononiit25, izons. thew alternatives lvill al’ro bc accountctl
In thi5 decade few of the Icast industri;il for.
countries will hc able to set up coni~xting
advancccl production systems. bccausc of lack of
skills and capital. In&ed. with the movt towards
automated capital intcnsiw production in indus-
trial countries, the cheap assembly base of the
low-income dwclopin, 0 countries may well be- One of the rmjor reasons for introducing WV.
come ICY, attractive, possibly to the point that technology is to cut production couth and so
offshore manufxturcrs will relocate production become more competitive.. The reduction in
iwar their major markets. In the xivanctxi production cost5 will depcncl on the change in
services too these countries arc hindered ;115(1b> inputs of labor. capital antl so on and their price
lack of infrastructure and reliable coniiiitinic;i- (i.e. current wqe and interat rates) in each
tionr, networks. The low-incornc countrit’s are country. Table 21 sho\v> the fall in production
also the least industrialized. Nwerthckss. China costs in each of the three kinds of economy
and India are exceptions to the extent that both considered above for agricultural and industrial
have a11 industrial capacity ivhich rivals that of goods and scrviccs. The savings noted earlier are
many industrial countries. and have ;I proven rctlected in these shifts \cith industrial production
 LO\\
(\ 1 (\I)

Ayriculturc
Systemic -LL -LL - LL -\‘L -\‘L -N
Skillcd -\‘L +VL TSL -SL + .s L ts
Unskillsd -LL -LL -LL -SL -SL -N
Capital +sL +NL +SL TSL + s I. +S

Extraction
Syhteniic -L&l -LXI -LX1 -LX1 -l.\I -LXI
Skilkd +\‘L +c’L +Ti’L -SL l t\‘L. +NL
Unskiflcd -\‘L - \‘I. -XL -SL - 1.1. -NL
Capital +x1. +NL + Xl. -SL +\‘L +sL
Basic industr)
Systemic -L - L - I_ - LL - LL - LL
SkilId +LL +LL + LL +\‘L +vL +\‘L
Unskilled -%I11 -hlll -hlff -\I -h! - Lhl
Capital +\‘L +vL +L’L A\‘L l t\‘L +\‘L
Intcrmediatc industry
Systemic -hl -hl -XI -L -L -L
Skilld + VL +vL +\‘L A\-L +NL +N
Unskillctl -L&I -Lhl -L -LL -NL N
Capital +LL + 1.1. + VL ?\‘L +NI. +N
Advanced Industry
Systemic -LL - 1~1. -LL -\‘L -L’L -N
Skill4 + VL +v1_ +\‘L tSL +NL +N
Unskilled - VL -VL -c’L - SL -NL -N
Capital + Nl. +NL +NL TSL +NL +N
Utilities
Sybtcmic - I_ L -1-L - LL - LL -LL -\‘L
SkilId +L’L fVI. +VL +\‘I_ +v1_ +c’L
Un~killcd -\‘L -VI. - \‘I. -L -L -VI_
(‘apita +NL +NL -t&l. + LL + LL +NL

Basic scrviccs
Sytcmic -L - I_ - I. -LL - LL -x
Skilled - NL -NL - ri L -SL -NL _N
Unsfiilled - NL -NL _ IUI. -SL -NL -N
Capital +NL +NL +I% -SL +riL +N

;\dvanced scrvicc5
Systemic -hI -bl ->I -LX1 - LX1 - I_
Skillcd -LL -VL -L’L -\‘L -KL -NL
Unskilld -Lhl -Lb1 -L -L -L - NL
Capital +1.X1 tLkl +L -L +L +SL

ficy to scak (pcrccnt change):

N NL \‘L 1.1. L Lb1 hl hlfl If flfl \‘I4
0 I 3 4 s 1’ IS 2-l 31 -II) 50

in the industrial countries showing the greatcst If the industrial countries do indeed manage
decline in production costs. and agricultural the transition to “systemic” technology. and so
production in developing countries showing the preatlv improve efficiency in the use of capital
least v.ith little or no change. This table then and intermediate goods and so on. then the
measures the shift in comparative advantage for resulting pattern of comparative advantage
each economy in the production of these broad \vould chanpe to that shown in Table 3. In this
categories of goods. case production costs would be cut more
X~riculture -\‘L -XL -N Agrlculturc -H -L -N
IfldlN) -XI -LL -VL Indusrr) -\‘H -titi - H
Scrviccs -L -VL -NL Scrvicss -hlH -tt -L

Key tu v_xlt’ (per milk):

N NL L’L LL L LA1 Xl hltl H tit-1 \.H
UI 21s 12 IS 2-l 32 10 50

dramatically and would have an even cureater agriculture and services. and growth and employ-
impact on differences in comparative advantage ment worlduide. These calculations require
between countries and sectors. However, some form of macro-model of the world econom\
although the costs are reduced by ;I greater in which these relationships are made explicit. so
amount, the pattern of change across sectors and that the successive impacts of ;I change in
countries is the same as in Table 21. technology in one sector of the world econom>
can be tracked throughout the world.
A number of attempts have been made to
calculate the impact of information technolog
on national economies (Dixon and Vincent.
3. TIIE MICRO-MACRO PROBLEM 1070; Dell ‘Mour, lYS1: Leontief and Duchin,
1985). Few of these take account of international
effects, but those that do show them to be
important. especially for countries where the
The most straightforward microeconomic pace of technical change is relati\,ely SION
calculation would now take each of these price (Rathenau. 1981; Cole. lYS2). In the present
shifts in turn and estimate the change in demand paper, these domestic and international pro-
for each good (assumin, 1~that the demand elasti- cesses are considcrcd simultaneously in a general
city were known). If the increase in demand is equilibrium model so that the impact of changing
greater than the increase in labor productivity. it technology, prices, and supply and demand are
might then be concluded that jobs would be considered together (see Chichilnisky and Cole.
created rather than destroyed by introduction of lY7S; Cole and Miles, 1YS-l). The very nature of
the new technology (see e.g. Ayres and Miller. information technology. as ;I phenomenon which
lYS?-). At the international level. trade prospects strengthens tendencies for the world to respond
are argued on ;I sector by sector basis from the as a single market. as well as its impact on
shifts in comparative advantage. Obviously, if comparative advantage across sectors and
several countries are introducing the new tcch- countries, demands such an approach.
nology simultaneously in order to improve their
international competitiveness, in different sec-
tors and at different rates. and sectors are also
competing with each other for labor and capital
the calculation becomes much less straight-
forward. It is further complicated because, when The use of a macroeconomic model requires
rather large md kvidespread technological the microeconomic data drawn from very many
changes are underway. so that levels of demand enterprise and sector level studies to be com-
and employment are everywhere changing. the bined together, so that general ideas can be
assumption that wage rates and other prices tested. For the comparative approach favored
remain constant may be quite unsatisfactory. here, it is most appropriate to work at a fairly
These indirect effects can be just as important high level of aggregation. sufficient to relate the
as direct effects. so that what happens in manu- computed results to the “parables” of economic
facturing technology in the industrial countries, theory and also to the “paradoxes” which arise
for instance. not only has significance for manu- when multiple actors or countries are to be
facturing in developin, (7 countries. but also for accounted for (see e.g. Jones, 1982; Dixit. 19S3).
 Thih ;IIW enahl<> \:w;itlon\ in rmdcl parameter\
and data to be euplord. ‘A gw_l deal ot
expcriencr \\ith m;uo-nioJcl~ (SLY e.g. Jlal-
2strange and ?.luet. lY,S4) \ho\i\ that the forecart> ( ;I ) Ptruc-rtc i (I/’ ~~~~~~~~iiii~iifi~~ri
of aggrqate \ ariahI (zuzh ;L\ nation;d income
or urlen~pln~ mcnt) do nc)t depend gt’atl\ or1 the The impact of pror’nt trend\ 111 the diffusion of
Imel of qg-res;ltion a \uch. although ob\iou~l\ infarmatic>n tcchnoloe\ 011 the pattern of
detaild conclusions for pxtlcular xctorj carincit >pecinlization ;Ic‘ro\‘\ c(;llntl-ic\ ih hho\\ II in T;lblc
he drawn. The undcrlving a\\umptlon> about 3. This show the combind rewlt of the direct
economic 5truc‘tuw and technical chan~c art’ and indirect impact\ c~,rrcxponding to the‘ shift4
muih mow important for conclusion5 about the in comparative ad\~antagc shou n III Table ?a.
ili;ii‘r~~-rcoiioiii~. One’s confidence in xii\ coiiclu- It k se11 at onct’ that the nc’\\ pattern ot
sion\ is greater if rr‘5ults arc not chan~txl gl-eatI\ sptxialization is not e\‘er>\\ here the \;ime a\ that
by ~~ariationr in data or the rcl;Lticln\hip\ ~~~~LIII~cJ sugscsted hv the hector bv actor shifts in
(a5 to the nx! market\ adjust to changing coniparativc advantage. A\ espzctcd. the in-
competition. or the \L;IV data arc combind. for crcwetl conipetitivenrss of the industrv actor in
c~mplc). Ewn when the data xncl relationships the high-income industrial countric\ rklts in ;i
are not well enough established to asurt’ wx~rlclwide incrc’xt’ in dcniancl for it5 clutput. but
unambipuou~ conlcusions. the c‘xfrcisc provides 2 decrcasc in output in the mediun- and hv-

for ;I cornprison lwtwecn altcrnati\.c sets of inconic countries. f Iokve\,er. cOntr;trv to \vh;it
a~5uiiiptions and 50 i&ritific\ key trntlcncics and might bc espcctcd. agricultural prduGion in the
relationships. For the sake of brevity, onlv few
.such alternative5 can ht: prt’scntcd herc, but
these permit some tcntatkc conclusions about
the impact of inform;~tion tt2chnolog> 011 distribu-
tion and emloynicnt to be drawn.
A pruhlcm related to that of a~grc’gation is the
bay in which information tdinology i3 to be
reprewntccl in a model. The rt’voIution;krv char-
actt’r of information tcchndogy suggath that -hlll 111 +%I
Agricullurc
technical change 5houIcI bc trcatcd ;is ;i clih- Inclu\tr> + VI_ -hllI - 1.
continuous procc55. cvcii at the IIi;icroe~oIioIiiic Scrvica +NL -1. -Vl.
IeLrrl. In the folIoking calculation5 :i fiscd
coefficient (Leonticf) production function with
the discrete changes a3 sho\vn tn Table 1 is usccl.
rather than one ivith continuous substitution
po35ibilitic5 betwxn capital xiid labor. In addi-
tion. much of the impact of new tcchnoky~ arises
from product innov:ltions and these art‘ less
subject to the “l:i\vs” of comparative advantage high-income countries does not csp;111d. in fact
since they enjoy ;I temporary nionol~oly in quite the reverse. This is becauw th? cspxnhion
international mxkcts. AnalyGs is further compli- of the industry sector crwtc4 211 aclditional
cated bccauw of substitution xross sectors. for demand for capital. which in turn puhht’s up
esamplc. houwholcl equipnit’nt (wch ,I> micro- interest rates. and so niaka agricultural procluc-
wivc‘ ovens or viclcos) 11iadc Iess espcnsive tion in industrial countries wry uncompctitiw on
through the use of robotized production methods ;I worlclwidc b:isis. Thus. even though the sector
a11d automated assembly in the manufacturing by sector review suggests that the use of informa-
sector provide houwhold final services (such as tion technology must increase the compctitivc-
entertainment) \vhich woulci otherwise be purch- nt’ss of the agriculture actor in rich countrich.
a.sed in the formal service sc’ctor. Similarlv. thcrc the improvements in productivitv arc‘ more than
are shifts in the composition of consumpt;on. for offset by indirect effects arising i‘rom changes in
esample. an increase in the 11s~‘of information other sectors. As ;I result agricultural output
st’rvices by both public and private sector entcr- increases in the least industrial countries.
prisrs. While these iaues too art: still not well Although this may appear somewhat stransc at
understood at the empirical kvt’l (Gershuny and first sight. it follows directly from the theorv of
Miles. 1983). some allo\\ance can be made comparative: advantage (in other \vords. nations
through thk rclationship~ ud to drscribc tend to export commodities for kvhich they have
intermdiate and final consumptiun. favorable factor endowments).
 I-tlE (;l_UH.-\l. t\ff’.-\CI‘ OF I\FOK\I.\l’IOU I EC‘tt\Ol.O(;1 12s.;

that of the inctu\trI;d countria. e\cn though the

latter have achiaed grater incrcaa in prociuc-
tibitb. LVhat ih happening is that the benefits of
impra\ecl prcducti\it\ art’ being paswd on to the
major importer\ of iildustrial good\ - in other
words. their term> ~)f trade ha\e imprwed.
Again this ih not inconGstcnt \\ith conwntional
trade theory. M hich hho\\b that the consquences
of improved labor proclucti~ it! ;iw ambiguous
and ckpt21iti 011 the preciw combination of
eskting technologist. the amount of ttxhnical
ch;lnge. wqe rates and WI on (WC c‘.+ Soderskn.
198)). \Vith the prewnt ‘rtructurt‘ of the world
rconomy. the benefits of labor-wving technical
These indicator> retlcct the behavior of other chanse in the industrial countries art‘ exported to
variables. such ;I\ the composition of housrholcl the developins countries, at Icat in the short
incomrs, the demand fur different skill> or run.
chanyes in government spending. For esample. ;I The overall incrc’ases in the incomt’ in all
worsening of household income distribution countries are quite margin;il. xind pivcn the
~entxally arises from ;I decline in unskilled extensive restructuring of production and the
cmplo~mcnt. or an increase in the rate of profit. social and economic dislocations that this im-
Similarly. changes in the structure of production plies. the benefits from labor-saving technical
are directly related to shifts in spcci;iliz;ition and change appear slight. at least in the short run.
intcrnatiomrl trade. Thcsc structural shifts also This is especially true in the industrial countries
indicate change5 in the kvcl of commodity which arc acting as the locomotive of technical
dep~lltlC!llc~. aid social i-~org~iniz~itioris (such as change. World output has increased slightly. but.
urban-rural migration as ;I rcwlt of a shift from on balance. the loss in demand for consumption
agricultural to indu5tri:il procluction). goods as ;I result of job losses offsets the potential
benefits of improved productivity in the indus-
trial countries. Evc‘n though the competitivcncss
(c) 7‘irr ittrp1c 011~wI/tlowtll’tll. gtwrlr trtrtl of the industrial countries ha incrtxsed. the
clktriltlrlioti markets of the developing countries are too sm~ill
to create ;I strong effective demand. The slight
Changes in the distribution of incomc between increase in demand in the relatively smaller
countrit‘s arid changes in the distribution of markets of the miclcll~-income countries clws
incomc between hot~whold~ are both of interest. littlc to raise world demand. The industrial
Table Ja sho\rs the impact of present trcncis. countries would largely he competing among
t lere again. the raults give pause. since the total thcmselws for ;I greater share of each others’
income (i.‘c. Gross Domestic Product) of the domestic markets. Beyond this. the results
middle-income countries incrtxsc‘s by more than appc‘ar to confirm the worst fears of commcntu-
tars in inclu\tri;tl countries who expect uncmplo>-
ment to increase. and income distribution to
worwn.
Thia partial SLICC~SSof the industrial countricb
Economy group tligh \liddlc LOU in introducing the labor-saving potential of nev.
technology actually appears to bcncfit the
dewloping countries overall, and also to improve
Growth + .Y’ +NL +N
their income distribution xx_l employment. This
Dislrilution -L +Lx1 +L
occurs even in the middle-income countria
Employlncllt -1-L + LL + LL
Structurct -hlH -XIII -L whose industrial sectors art‘ hard hit by the
increased compctitivenss of the industrial econ-
omies. The reason for this is simply that ;I more
Kc! to scale (pcrc~nf):
labor-intensive pattern of specialization is in-
N SL VL LL L Lhl hl htfl H HH VH
duced in developing countries. as thrv become
0 I 1 1 s IZ IS 24 32 40 50
relatively more competiti\,e in a&icultur:il
‘A plus sign indicates an improvement. production. This is espazially so in the low-
tThc cntrics for structure indicate the &dint: of the income countries where agriculture is very
most advcrscly aff~cttxl sc’ctor. intensive in its use of unskilled labor (in great
contrast to the capital-intensive agriculture of that the ubc‘ of capital-silkins technoloq unamt71-
industrial sountria). The increase in emplov- wouhlv
-‘ favors e‘iportcr\ (we Soder\tcn. 19SO).
ment in the lowincome countrie is nevcrthcless The. income of de\elopin~ countrieb ;iri\C\
rather 5m:lll. around 5”(, dnd w \kould do little partly from the capital-xi\ in: p~J'tellti:ll of

to rduct’ the massive un~mplvyment in thtw information technology spilling over to ds\elop-
countries. Furthermore. c\en thi\ advdntx~t2 ing countries. and also from trickle-dwn effect.\
could tw lost. as increasing profitability in the arising from the increased imports into the
industrial countries encourages internationally inclu>trial countries. tIo\vever the income gap
mobile capit tO relocate. or 215 protectionist between industrial and de\rlqing countria
policies are implsmentcd by the industrial coun- Lvidcns. Through time this pap \vouid further
tries. incrcasc because introduction of the nr\v tech-
nology raises profitability most in the industrial
countries. Distribution now Lvorsens in all coun-
5. THE IMPACT OF CAPITAL-SAVING tries. ewn thouph levels of emplo~mcnt ha\c
TECHNICAL Ct IANGE everywhere increased. The \vorsenins of income
distribution is especially acute in developing
The above picture chm~ys mxrlxdly if the countries. but even in the rich countries. the
industrial countries realize the transition to “sys- entire gain in national household income bvould
temic” technology. The shift in production costs have to be devoted to redistributive transfers. if
resulting from this direction of technical change current norms were to be maintained. In
\vas sho\vn in Table 3. This indicated that developing countries, the increase in total
production costs llO\b uould he cut more employment is cvcn less than before and so.
dramatically and woulci have an even greater agaIn. would do little to relieve the unemploy-
impact on differences in comparative advantage ment problem of the poorest developing coun-
between countries and sectors. but that the tries. In industrial countries the increase in the
pattern of comparative atlvalltnge would be number of jobs could more or less eliminate
identical. current unemployment. This tends to support the
The impact of introducin, 0 these technologies findings for the Unit4 States (Lcontief and

into the world economy is shown in Tablo Ih. Duchin, 19SS).

Immcdiatcly it is seen that the total output of all
countries is geatly increased. but now the
greater benefit xcrucs to the hi&-income coun- 6. MORE RAPID DIFFUSIOS OF
tries. This incrt‘asc in output arks ~L'GIIISC now INFORMATION TECt INOLOGY IN
improved efficiency in the use of capital leads to DEVELOPING COUNTRIES
an increase in employment. This in turn. Icads to
an additional consumc‘r demand sufficient to The above calculations xsutnt ;I wideninp

sustain the eslxuxkxl production capacity. This technology gap bctueen the industrial and the
multiplk~tive prows5 is strongest in the indus- developing countries. This assumption is in line
trial countries. ivhere the extent of technical with the idea (e.g. Boon. 1952) that new labor-
change is assunird to proceed most rapidly. It is saving technologws will enable mnnufncturins
reinforced bv an improvcmcnt in the terms of industries to reloc;lte back into the industrial
trade of the’industrial countries. Again this fits countries, a reversal of the deindustrialization
with conventional trade theory where it is shown process of the last decade, or the idea (e.g.
Kaplinsky. 1YY-l) that systemic technologies art’
only possible in countries with a sophisticated
infrastructure of the high-income countries. In
contrast. sonic commentators believe that multi-
national firms will continue to seek lo\v-co5t
production sites in developing countries (Peet.
lYS3). Others (e.g. Jacobsson. lYS2) argue that
Growth +L -tLL +vL technology transfer is far less difficult than in the
Di\tritwtion - l_hf -hlti - rblH past so that many developing countris5 may have
Emplogment + I.1. +vt_ +vL. the capability to keep pace with the industrial
Structure +M -HH -L countries. Vernon and Davidson (IYSI) have
suggested. in any case. that the old product cycle
model of technology transfer (Vernon, lY70)
may now be less valid, because of the increased
rapidity of technology transfer. Furthermore, if
the &tt:l in T~bks 21 and 3. but now with :I
relative acceler,Ltion of technical change in the
niiddlt2- and IL)!\-income developing countries.
Ewzntially it i> ;l\\umt’ci htre that the ttxhnolog>
which ih Indkci in dc\cloping countrir’s I>
imitative of that being innwatcd in the industrial
countria. \Vlth this technology. indu\tr) in the
middk-income countrir~ nou becomes the mat
competitive wc‘tor and agriculture in industrial
countria btxjmes the least comptztitive.
The overall result of introducing thex patterns
of technal ch:mge arc drown in Tables &I and
hb. Pet-hap\ thf most striking feature of these
results is their >imilaritv to the earlier findings in
Table> -la and -lb. -\\.ith only labor-saving
information technology. the gain> in income are
again small, ;tnd now the benefits of technical
chanpe in the developing countries are passed
over to the industrial countries.
If the technology is assumed. once again, to be
capital-saving. the increase in total income is
again much more substantial and now most
favorable to the low-income ccononiit3.
Developing countries ;Ire able to take advantage
of the rclatiwl> enormous markets of the richest
countries. Because profitability in developing
countries r&e rclativclv more than in the inclus-
trial countries the catchins Up process implied hy

Tahlc ha. 7‘1Ir~ u,r[""“ I,/ t?lor<' rd/"'l d//]ki#/l 01’

ttrtwwwi~itrqftdwolog~~10 tlc~dr~pitr~ cofultric5

Ecor1on1v I 5
“roup t li$ Middls Low

Growth +NL +N + NL
Di5trilxttion - LL + l-1. + VL
Employlllcnt - \‘I. -VL -NL
Slructurc -tl -Ml1 -XII1

Kct to LIGIIC (pcrccnt):

N NL VL 1.1. L LXI ht hltl fl IitI Vtl
0 I 1 -I s 12 IS 2-l 32 -II) 50

l‘ahlc Oh. Tlrr i~ttp~cr of mow rtrpirt d/jfir.,io,r 01

l~clt”‘~ll-.s~l~~lt~~ rdrlrolog~ ,o tllw~lo[‘i,rg cwwrrrirs

Economy group High Evlitldlc Lou

Growh +LL +LL + Lhl

Distribution -LL -LL -L
Employment +vL -L -N
Structure -VL -MH -hlH

Key to sc;tlc (pcrccnt):

N NL VL LL L LX1 M MH H HH VH
012-18 II IS 24 32 40 50
sector of the industrial economic> \+ouIJ suffer
from decreeing investment. but then. :I> capital-
saving technologies are intruduccd 111other WC-
tars. the hector would ;i?;tin expand The rclati\e
enormity of the high-Income wuntrit’\ in the
\\c>rld economv means that chanse5 in the btruc-
+LII -\ItI +\I
turr of their .economies force complementar)
-LL - L’rl - L
chanpes elsewhere in the \\orld. and so middle- +NL +LL
+LL
and loin-income economies face first an rspan- +hl -t_(t1 -L
sion and then ;I collapse of agriculture. This
would be compounded by the premature junking
of esistinp production apacity and protcctioniht
policy responses.
Again the extent of this process depends on the
direction and timing of technical change. As
Freeman and Soett: (1%) observe. while the by intt‘rn~~tional firms (and so is relatively cost-
scrapping of older generations of capital stock less). For low-income countries. in particular.
and heavy investment in new equipment ha been this might be considered the best pasible situa-
characteristic of postwar pro\vth in Japan. the tion which could result from their present imita-
same approach would place ;I heal; strain on the tive approach to new technology.
process of capital accumulation 111 developing Even though this scenario might be considered
countries which are trying to catch up \vith the implausible. since it ‘‘issumes ;I questionable
technological leaders. unless major improve- pattern of technology and skill diffusion and
ments arc made to the productivity of capital. wishful thinking about the possibilities for inter-
Already. even in the industrial economics. some national cooperation. it nevertheless demon-
R&D intensive “state of the art” production strates the limitation5 of the technological as-
capacity is being closed in the face of inter- pirations a~lci policies of many countries. The
national competition. In this worst case scenario enormous problems of unemployment and social
then. developing economics could well be push4 maldistributiori faced bv these countries, and
more deeply into ;I cycle of poverty and tlepc’nd- their technological dependence on the industrial
ence by international forces. Hut even though countries art‘ not relieved. Or. worse than this.
developing economies arc especiallv susceptible the least industrial countries could become the
to this process. “knock on” effects &ulJ arise in most damaged through an international tcch-
industrial countries. In the short run, therefore. nology and trade war. The question remains then
it is not difficult to construct a scenario in Lvhich of ivhethor developing countries xvoicl this dual
Schumpcter’s vision of “creative destruction” trap by using information technologies in :I
becomes one of “destructive creation” in tvhich different way’?
aI1 economies could become worse off.

S. INTEGRATED TECHNOLOGY IN Tf IE
LEAST INDUSTRIALIZED COUNTRIES

A best case scenario i.s obviously more con- One alternative might lie in the potential of
strained by the availability of factors and tcch- information technology for enablinp small SC;I/C’
nology. but might involve policies designed to and decentralized production. A number of
reduce the waste of productive capacity and to authors have suggested the possibility of
distribute the burdens and benefits of change. “integrating” or “blending” new technologies
Table 7b shows one such possibility which with more traditional techniques (Bhalla 671al..
assumes international cooperation to “manage” LYSJ: von Weizsacker er (11.. 195-1). Other authors
restructuring. This is based on the same pattern (e.g. Wad. 1YS-I: Freeman and Soete. lYS5) have
of technical change as Table 6b (i.e. with I&or suggested that developing countries may be able
and capital productivity increases most rapid in to “leapfrog” some of the very costly and
the developing countries), and also an upgrading essentially obsolete infrastructure and heavy
of the necessary skills through successful training industries previously associated with the early
programs. National income and employment art‘ stages of modernization, and escape the trap of
raised in all countries. The outcome esaggerates technological dependence. The consequences of
the benefits to developing countries: it is adopting this technology in the low-income coun-
assumed that the technology is not appropriated tries are now explored.
 Bhalla (‘I 111. ( IYS-l] argue that ‘.lf traclltional
production can be upgr~~d~d by a marriage bith
neatly emerging technolo+. while htill retaining
much of the whstane and form of the older
metho&. sains In efiislrnc> and competiti\enehb
can be achieved \\ hik preserving esihting human
+S +Sl. -hItI
and ph!Gcal resources.” The csscntid point here +Lhl +I1
- I.
15 that uw of nt‘~\ know-how to improve the -L +L.L +I1
productiCty of rewurct‘\ does not have to be -\I -\l -Pi
Ilnketi to greater mechanization. and so could
capital ha\ in: overall. For esampk, farmers ma\
improw \-isids of new varieties of crop througii
the use of information technolugics to cktcrminc
optimal choiws and timin, 17of inputs ;ind market-
in:. but \iithout the ux of tractors xxi other
espcnsive equipment. Instead they could emplok
more labor with slightlv upgraded skills for the
more efficient applicati&i of nutrients and pesti-
cides. While such technologies would ckm~~nd
somr additional skills, overall they could reduce
the cost of intermediate and capital inputs xnd
also incrensc the number of jobs for relatively
Sector
less skilled workers. This implies ;I clear shift in
the pattern of innovation and diffusion. since
these technologies \vould no longer be imitative - I_ -L
of those in industrial economies. hut would +L +L
+\‘H +LM
reflect instead the consumption and employment
- I. -L
characteristics of developing wonomit‘s.
The fc\v empirical studies available in this area
allow soiiw speculation about the quantitative
properties of these technologies. Altornativcly. N NL VL LL L Lhl M hllI 11 HH \.[I
0 I 2 ‘4 s II IS 2-i 32 40 50
the iii;icrocconoliiic model itself may be used to
cjtimatc just ho)v capital-saving and labor-
absorbing such ;I technology system would have
to be in order for specified employment. income ly (hut without reducing the income of richer
distribution and grou.th targets to be met, and houxholds) arid production and consumption of
then ask lvhethcr such ;I technology is realistic in all goods has incrcasd. The improvement in
the light of the available empirical evidence. This c;ipit;il productivity and much increased national
second approach is dopttxl here. incomc cnat~lcs overall growth rates tU be more
The model is set up to define a tcchnoloq b, than maintaind. Even with rather conservati\,e
\\ hich would increax the level of cn~ploymcnt in aaumption~ about the technology. the c;~Icul;~-
Io\v-income countria up to the full complement tion suggest> that it is possible to raise incomes bi
of the \vorkforce, to raise national income and ;I significant amount and still maintain an accept-
improve its distribution and also maintain ;I able rate of growth. There is no ma$c invokd
relatively independent production system. i.e. here: Lvith the hypothesized technology. all
one in tvhich net imports of major commodities human resources are employetl more proclucti\r-
are small. If ii0 tariffs arc applied. then this ly and some capital and material savings arc
ajsumt‘s that domestic production costs match ma&. anti powerful multiplier processes operate
those in international markcth. which dcpcnds on in the domestic economic5 of the lo\v-income
the production technology in other economic’s (in countries.
this case the technology shown in Table 21 is Table Sb shows that the rcquircd changes in
taken). Table Sa shows this situation could be factor inputs to achieve this arc‘ not prcat. This
brought about by the pattern of technical change suggests that such innovation would be within the
given in Table Sb. Table 8a shows that while the capability of a limited research and development
national income has btxn raised by nearly 26% system (especially bearing in mind that. with
(about the same ax the “best c;~e” shown in current wage levels. production costs using the
Table 7b). kmployment has increased by more new technology are more or less the same as with
than 30’40. Income distribution is improved great- existing techniques). The issue here is not
 THE GLCIB:\L l\IP,A(‘T OF ISFOK\l.-UIC)‘. I’LC‘HSOLOG~ I 1’) I

lrhether huch technologies can In principle be effect> of nr\\ technoloc\ generalI\ itill be at
innovated. but \\ hether there is an institutional least as important ah th: direct efiect~.
frame\vork for their innovation. Developing To<) little attenti~~n h,i\ been paid to the
countries face morr acute strain5 than industri:tl systemic effect5 of informatl<Jn technolt>s> on the
countries in meeting the ..high technolouv”2, global t’conom\ ;I\ ;I \\ hole. <specialI! the quick-
objective5 of national securit), and the inter- ened response of intrrnatic~nal arid domestic
national economv at the same time as meeting markets to changes of all klndh. In thib situation
domestic social .nerd,. To some deprtx. the very rapid technical change could lead to ;L
integration of new and traditional technologies self-reinforcing spiral of d ecl~ne. tvith bottlenecks
mav provide :I bridge. Clearly. the t~ko Iq+t and \vataze of production capacit!. shrinkin:
lo\\‘-income countries. India and China. with mxrkcts and unbalanced poll<ies. This could be
their proven ability to create sophisticated tech- espccixlly clxnagin~ for developing economies.
nologies and the masGve domestic economies Hokvever. for all countrie\. thcrc is :I clear need
rquircd to jtt>tify the public support of this to devise international >trntepia \\ hich take
innovation. have this potential. If this could be advxitagc of the far-re‘lching potential of
realized. other lobv-income economies then information technology but ;Inxlior;tte the per-
would gain from the diffusion of these nt’u verse effects of restructuring.
technologies. The results of this papc‘r >tron$y susgcst that
in concentrating on the question of national
quisition of information technology - where
9. COiNCLUSION the technology will be tlsed - too little attention
has been paid to the question of what kind of
All countries face choices and trade-offs be- technology should be used. This requires further
tween economic grotvth. employment and social investigation of the trade-offs bct\veen capital
distribution 2s ;I result of the diffuGon of expcntlitures. training and education. research
information technokx~y. The results of this paper and dcvelopmrnt and social costs. and the
show that the distributional cffccts of informa- various timescalcs involved. This in turn calls for
tion technology arc likely to be complcs. niorc detailed analysis at the enterprise and
Whether the technology is primarily lahor- sectoral level. as well as at the &~hal level.
saving - so that lost jobs and demand have a The dilemn~~~ of pro\vth verbus employment
retarding intlucnce on ccononiic growth. or and distribution which the choice of information
capital-saving - with ;I positive impact on technology poses may bc especially acute in the
grotvth and employment - the gains are likely to middle-income countries: \\ bile ;I for\\ ard leap in
be very uncvcnly distributed hetueen different technology may bring social hardship in the short
5cctors and workers. In the industrial countries term. it could lead to all-around economic
there is ;I strong tcndencv for income distribution improvements in the longrr term. In the Icast
to worsen. In the deijcloping countries the industrial countries, ho\vevcr. rvcn azzuming the
outcome will he greatly affected by what happens most anhitious hopes for introduction of the
in the industri:tl countries. technology. the amount of IWV emplo~~ment and
The majority of studies of information tech- income would be too small for there to be :I great
nology have concentrated on the twin issues of reduction in the present high level of unemploy-
productivity and comparative advantage at the ment and poverty. Some of the rcsult~ presented
sectoral Icvel. and neglected the interrelations in this paper su?gcst that an alternative job-
with other sectors and other economies. Often creating use ot Information technology would
ths results have been carried over to the national have much more positive results for income
level: this is likely to sive rise to mislendinp distribution. employment and grov,th. and also
conclusions about the benefits and costs of that the innovation of thih technology is not
information technology. This paper shows that. beyond the research and dc\elopment capabilit>
in a world of international trade. the indirect of some low income countries.

search Unit. (SW Chicklnisky and Cole. lY7S;1. iY7Sh: Bh;lgwri, Brcchrcr a&J H;it;a. 19s): and Cohen rr ~1..
Colt 1YSO; and Mcaphcr and Colt. IYSI. IYSJ) drawing 1YS-l).
on equations origin~~lly spccificd by Gracicla Chichi;
12’11 ~~ORLD DE\ ~1_01’5lE\ I

REFERENC’ES