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The impact of Technology on the economy
Fintech and the Future of Retail banking Brussels, December 9 2016
Geert Gielens, Ph.D.
Chief econmist
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Technology and growth
Technology and consumer surplus Technology and employment
Agenda
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Technology and growth
0 10 20 30 40 50 60 70
0 20000 40000 60000 80000 100000 120000
global innovation index
GDP/capita in USD
source: Global Innovation Index (2016), Worldbank, Belfius
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Technology and growth: causality?
-6 -4 -2 0 2 4 6 8
-0,06 -0,04 -0,02 0 0,02 0,04 0,06 0,08 0,1
per capita GDP growth
Total intramural R&D expenses % YoY
United States
source: Eurostat, Worldbank, Belfius
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Technology and growth: productivity?
source: Brookings
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Technology and growth
Adoption (cross section differences)
Extensive margin Intensive margin
Causality? (time series data)
Macro level
Measurement issues?
Enterprise / sector level
Channels
Productivity
Creation of goods
Comparative advantages and International trade
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Technology and consumer surplus
Increased choice; love of variety
US: : 3% of GDP (Broda & Weinstein, 2006)
EU: : 0,5% -2,8% of GDP (Mohler & Seitz, 2010)
Lower Prices
0 50 100 150 200 250 300 350
jan-06 jun-06 nov-06 apr-07 sep-07 feb-08 jul-08 dec-08 mei-09 okt-09 mrt-10 aug-10 jan-11 jun-11 nov-11 apr-12 sep-12 feb-13 jul-13 dec-13 mei-14 okt-14 mrt-15 aug-15 jan-16 jun-16 nov-16
IT-appliances Computers Software
Price index (Belgium)
source: FOD economie
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Technology and employment
Technological unemployment (Frey & Osborne, 2013)
source: OECD
Share of workers with high risk of automisation
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Technology and employment
This view is exaggerated
Biased view: one knows what one can lose, one cannot imagine what will be created
either because of new sorts of jobs (f.i. app programming) either because of increased demand for existing products
However it will generate shifts between occupations and industries.
Conditions:
Labour & other markets sufficiently flexible Institutional change
Permanent schooling
source: OECD
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Technology and employment
Increased inequality
source: FRED, Fed Res of St Louis
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Conclusion
Technology contributes to growth & consumer well being
but it needs to be embedded in a “fertile system”
It is not a Pareto improvement
Mitigation via demand and supply side measures needed
