[Press Release]KDI-Brookings “Analysing the Impact of Digital Economy on Productivity and Inequality”
January 20, 2022
□ The Korean Development Institute (KDI) and the Brookings Institution (based in the U.S.) publish their joint research report under the title of Shifting Paradigms: Growth, Finance, Jobs, and Inequality in the Digital Economy.
□ This report analyzes the impact of technological progress on productivity, finance, labor market, and inequality and provides in-depth views on the implications for the overall public policy.
○ As the digital transformation is accelerating due to the COVID-19 pandemic, researchers are concerned about a Luddite backlash against technology amid productivity slowdown and deepening income inequality.
○ In the product market, technological advances brought about a widening productivity gap between firms and hampered technology diffusion by way of market concentration and reduced competition. This report points out that failures in competition policy lie in the background, particularly missteps to adapt to changes in data and digital economy sectors, which resulted in weaker competition in those areas.
○ In the labor market, automation and digital innovation cut down the demand for repetitive manual tasks and led to higher labor income inequality. Also, wage growth lagging productivity growth caused the decline of the labor income share.
○Accordingly, this joint study argues for democratizing* innovation as a policy direction, which requires reinforcing the current redistribution policy and attention to a policy agenda of predistribution. * It is to make technological innovation conducive to better productivity and distribution as well as higher wage in wider segments.
□ Against this backdrop, policy implications by sector are suggested, coupled with key recommendations. They are outlined as follows: competitive policy in the digital era, creating an innovation ecosystem for technology diffusion, strengthening digital infrastructure, education and training to keep pace with technological advances, and reforming labor market policy and social security system.
○ (Competitive policy in the digital era) Stricter enforcement of antitrust laws, regulating the use of personal data, overseeing antitrust platforms, antitrust oversight for IT megafirms, and establishing regulatory bodies on digital markets
○ (Innovation ecosystem for technology diffusion) Amending patent laws reflecting sectoral characteristics, enhancing the direction of technological change, expanding innovative finance, strengthening incentives to encourage private sector R&D, achieving a better balance in sharing risks and rewards of government-supported research projects
○ (Boosting digital infrastructure) Narrowing the digital divide by investing in high-speed internet and mobile networks
○ (Education and training to keep pace with new technologies) Fostering a workforce complementary to innovative technologies, expanding opportunities for high-skill education and training for low-income groups, and revamping upskill, reskill, and lifelong education
○ (Improving labor market policy and social security system) Shifting policy focus from job protection to supporting workers to move to new and better jobs as well as improving job mobility
□ This publication is the second outcome of the four-year-long joint study between KDI and Brookings on the theme of the New Growth Agenda, launched in 2018. The two think tanks will continue to discover new policy agendas and proactively collaborate and conduct convergence research.
○ Published in 2020, the first outcome report, titled Growth in a Time of Change: Global and Country Perspectives on a New Agenda, looks into how technological progress has changed and affected the growth paradigm from a global perspective, providing implications for policy direction.
○ In celebration of the release of the new publication, KDI and Brookings will host a virtual book launch on January 20, 2022 (21:45~24:00 KST), and this event is open to all via pre-registration.
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The Department of Macroeconomics is conducting researches on the macro economy and macroeconomic policy, particularly focusing on suggesting the analysis of macroeconomic trends and current status of the economy at home and abroad, the economic forecast, and the policy direction of the macro economy. The Department is also in charge of establishing, sustaining and maintaining various econometric models, based on which it analyses policy effects and develops a long-term economic forecast.
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