Ingredients for The New Economy: How Much Does Finance Matter?

Abstract

Both macro and (still scarce) micro evidence support the idea that a new economy has emerged in the US (hidden but not killed by the adverse cyclical phase), not (yet) in Europe. Some have argued that the inadequacies of Europe's financial system are an important part of the explanation. This paper, after surveying the existing literature on the new productive paradigm and on the related financial aspects, both in the US and in Europe (in Italy in particular), claims that financing the new economy has more to do with traditional firms investing in ICT than with the creation of new firms in ICT-producing sectors. Saying that finance is a major obstacle in Europe to the development of the new economy may be an overstatement, though countries, like Italy, where the average size of firms is small are probably facing specific difficultiesgrowth accounting, information and communication technologies, firm organization, human capital, financing policies