from policy reforms that create the facilitating environment in which networked information technologies can take hold. UNCTAD investigates the same question as BW, but they use a very different methodology. Using the general-equilibrium econometric model (the GTAP model) UNCTAD considers the long-run effect of Internet usage and facilitating policies on GDP in various regions of the world.
46 Adjusting the UNCTAD simulations to be of comparable magnitude to the survey estimates from BW 47 , yields the result that GDP in the developed world would be about 4.9 percent greater (about $1 trillion) in the long run—strikingly similar to the figure in the BW study, which uses a very different methodology. UNCTAD assumes that developing economies do not have the facilitating environment in place. Internet commerce yields only one-third the gains accruing to the industrial world: GDP would be 1.2 percent ($30 billion) higher in Asia and 1.0 percent higher in Latin America ($15 billion).
If developing economies did deepen service sector reforms, creating a facilitating environment for information technologies to take hold, and put in place the legal framework to help create an environment of certainty and trust, they could enjoy benefits of more efficient resource utilization much greater than those shown above. Therefore, the UNCTAD study implicitly shows the consequences of incomplete policy reforms: Incomplete reforms cut by more than half the potential gains to be had from the resource efficiencies of networked information technologies. OECD takes a very broad overview of the potential for gains from external liberalization (e.g.
trade and investment liberalization and removal of subsidies) and domestic policy reform (e.g. fiscal prudence and domestic labor market reforms). Together these yield domestic resource reallocations, immigration and capital flows, and a changed structure of production and trade around the world. Or, not—since what the OECD does is compare a “high-performance” (HG) scenario where these reforms and changes take place, and a “business-as-usual” (LG) scenario where polices around the world proceed pretty much on the path that they are now -- some policy improvements, but not very much.
(Notice that the scenarios do not consider a back-sliding of policies toward protectionism and large fiscal deficits.) What are the differences between substantive reforms and continuing on the current policy paths? For the industrial economies of the OECD, GDP growth would be 3.0 percent per year in the HG compared with 2.3 under the LG scenario (compared with 2.5 annual percent growth 1971-1995). For the non-OECD, GDP growth would be 6.9 percent under HG and 4.1 under LG. For China, the difference would be 8.2 GDP growth under the HG scenario and 5.3 46 GTAP was developed at Perdue University in conjunction with a number of international organizations including UNCTAD.
See UNCTAD, pages 28-30 for more discussion of the model results. 47 In one of the simulations performed, UNCTAD examined a 1 percent improvement in resource utilization by industrial economies and a 0.3 percent in improvement by developing economies in conjunction with increased service sector efficiency. They note, “These percentages do not intend to reflect the actual differences in access to the Network…but simply represent a working assumption.” Adjusting this parameterization to the same magnitude as the evidence found by Brookes and Wahhaj (op. cit), the UNCTAD “shocks” should be 3.5 times as large. - 32-