The Effect of IT Innovation on Industrial Output Elasticities

Over the past decade, IT investment has been regarded as a key factor in enhancing productivity and economic development in Korea. This paper will assess whether the IT industry can positively affect structural change using an Input-Output model. Changes in Korean industries are traced using assumptions of IT innovation based on data from 1995 through 2000. Analysis reveals that the response of the economy falls short of our expectation that the development of the IT industry would generate growth in the productivity of the Korean economy. Government policy has been oriented toward cultivating IT industry through heavy investment, while neglecting efforts to make the overall industrial structure compatible with IT. We conclude that IT policy should be market-oriented to make the overall economy IT friendly so that industrial structures will respond more positively to IT development