Endogenous Information Carrier Technology

We develop a growth model that features the endogenous two-tier innovations of information carrier technology and production technology. Information carrier technology promotes production technology innovation and thus economic growth through improving the preservation and dissemination of knowledge. On the asymptotic balanced growth path, the growth rates of consumption per capita and production technology are higher than the growth rate of information carrier technology. The model calibration shows that, along the transition path, the research and development (R&D) investment in and the growth rate of information carrier technology are much higher than the R&D investment in and the growth rate of production technology, respectively, at the early stages, while reversals occur at the later stages; the timing of the start of sustained growth corresponds to the British Industrial Revolution in history. Our model provides a new explanation called the information carrier trap for the secular stagnation in the pre-industrial era and also a novel insight into the interpretation of digital economics