Modeling the diffusion of general purpose technologies in an evolutionary multi-sector framework

General purpose technologies (GPTs) are characterised by their pervasive use in the economy. The introduction of a new GPT (product innovation) as well as increasing productivity within a GPT sector (as a consequence of process innovations) affects the economy in several ways. First, a new GPT offers the opportunity to produce goods by means of cheaper processes; secondly, technical change within the GPT sector influences productivity gains in related sectors. Also social consequences such as changing wage share, technical unemployment and transitional wage inequality can be observed. Finally, the emergence of a GPT often coincides with output decline, preceding economic growth. This paper introduces a multi-sector diffusion model to study these effects by combining classical economics and replicator dynamics. Empirical evidence is given by the information and communication technology sector in Denmark and its impact on the economic structure from 1966 to 2007.