Technological and Economic Decoupling in the Cyber Era

November 20, 2020

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Format: Chicago

Daniel Garcia-Macia, and Rishi Goyal. Technological and Economic Decoupling in the Cyber Era, (USA: International Monetary Fund, 2020) accessed December 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The COVID-19 pandemic has accelerated the shift toward digital services. Meanwhile, the race for technological and economic leadership has heated up, with risks of decoupling that could set back trade and growth and hinder the recovery from the worst global recession since the Great Depression. This paper studies the conditions under which a country may seek to erect barriers—banning imports or exports of cyber technologies—and in effect promote decoupling or deglobalization. A well-known result is that banning imports may be optimal in monopolistic sectors, such as the digital sector. The novel result of this paper is that banning exports can also be optimal, and in some cases superior, as it prevents technological diffusion to a challenger that may eventually become the global supplier, capturing monopoly rents and posing cybersecurity risks. However, export or import bans would come at a deleterious cost to the global economy. The paper concludes that fostering international cooperation, including in the cyber domain, could be key to avoiding technological and economic decoupling and securing better livelihoods.

Subject: Exports, Imports, International trade, Technology, Trade balance, Trade liberalization

Keywords: Corporate power, Country b bans import, Decoupling, Digital economy, Export ban, Exports, Global, Import ban, Imports, Laggard country, Monopoly profits, Technological diffusion, Trade balance, Trade liberalization, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/257
Stock No:

WPIEA2020257
ISBN:

9781513561677
ISSN:

1018-5941

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