Studying general purpose technologies in a multi-sector framework: The case of ICT in Denmark

• We model GPTs empirically and theoretically in an input–output framework.
• An evolutionary model serves as a micro-foundation of the multi-sector analysis.
• By means of SDA we examine the annual impact of ICT and its channels for 1966–2007.
• Labor productivity in Denmark is measured in terms of vertically integrated labor.
• A new GPT leads to wage dispersion as a result of skill-induced technical change.

General purpose technologies (GPTs) are technical breakthroughs that are able to spur and sustain growth via their pervasive use in the economy. This paper attempts to study the effects of these innovations for the economic system on a theoretical and empirical level. First, an input–output approach is combined with the replicator dynamics of evolutionary game theory, in order to give a rationale how the adoption of an innovation at the firm level leads to a changing production mode at the industry level. Subsequently, a structural decomposition analysis for Denmark from 1966 to 2007 tracks the impact of the current GPT, the information and communication technologies (ICT), on aggregate and sectoral labor productivity growth. Findings show that the broad diffusion of ICT affected growth significantly only after 2000, owing to technical change, substitution and capital deepening, and can be associated with skill-induced wage dispersion.