Abstract
<title>Abstract</title> <p> This paper estimates macroeconomic technological innovation, measured as total factor productivity (TFP), during the period when an information technology-based economic structure (the IT economy) was established. Furthermore, it proposes a new method that extends the structural estimation of the production function by simulations of the optimal growth model. This paper, due to limitations in the availability of data, focuses on the United States and Japan. First, we estimate the production functions for both countries using OECD time-series data from the pre-IT-era economy. Next, using the estimated production functions, we calculate fixed asset balance, consumption, and GDP for each period under the optimal growth model, starting from the year that marks the beginning of the IT economy. Using GDP as a measure, we define the percentage by which the actual levels exceed calculated ones on the optimal growth path as the effect of technological innovation. Estimates show that in the United States, technological innovation has boosted GDP by 20% since the 2000s and by 30–40% since the 2020s. In contrast, Japanese actual GDP levels since 1996 have fallen significantly short of the optimal growth path. While this does not necessarily mean that IT-driven technological innovation has not occurred in Japan, it is undeniable that macroeconomic inefficiencies have occurred that more than offset the benefits of technological innovation. Furthermore, from a technical standpoint, depending on the estimates of intertemporal elasticity of substitution (IES) derived from prior research, it was not possible to obtain approximate values for the optimal growth path with sufficient computational accuracy. As long as we rely on the IES estimates currently available, there are limitations to the application of the innovation estimation method presented in this paper. (279) <bold>JEL codes</bold> C13, C63, E27, O30, O41 </p>