The Economic Impact of Cloud Computing on Business Creation, Employment and Output in Europe. An application of the Endogenous Market Structures Approach to a GPT innovation

Cloud computing is a new general purpose Internet-based technology through which information is stored in servers and provided as a service and on-demand to clients. Adopting the endogenous market structures approach to macroeconomics, we analyze the economic impact of the gradual introduction of cloud computing and we emphasize its role in fostering business creation and competition thanks to the reduction of the fixed costs of entry in ICT capital. Our calculations based on a DSGE model show a significative impact for the European Union with the creation of a few hundred thousands new SMEs and a significant contribution to growth. Governments could enhance these benefits by subsidizing the adoption of cloud computing solutions.