ICT in CGE models – Modifying the Typical CGE Theoretical Structure

This paper proposes a holistic approach to modelling of ICT technology within a CGE model. Accurate conceptual representation of ICT technology requires a multi-perspective approach which accounts for a dynamic nature of networked ICT at the broad economy-wide level, as well as for its sectoral-level enabling characteristics. The ICT-related technical change is a logistic function of the level of advancement of ICT economy to account for a network effect; the IT economy in turn builds on IT capital, IT-related knowledge, and other supportive and infrastructure measures. The IT-related knowledge can be sourced domestically or from trading partners as embedded in imported goods. Efficiency of the knowledge spillover depends on the quantity of the goods imported, potential to learn and ability to absorb knowledge from a specific trading partner. A simple numerical example is provided for selected APEC economies.