Some Macroeconomic Implications of an Information Age∗

We study the macroeconomic implications of three key features of an information age: i) the information technology revolution favors information production and hence information compared to other inputs of production becomes relatively cheaper; ii) information is an intermediate input that, once produced, can be reused at no extra cost (the marginal cost of using information is almost zero); iii) information production is human capital intensive. These features are incorporated into a dynamic general equilibrium model and the implications of an information revolution for productivity, distribution and welfare are analysed. ∗We thank the National Science Foundation for support under grant number SES-0111518. We have have received helpful comments from Allesandra Fogli, Boyan Jovanovic, Vincenzo Quadrini, and seminar participants at the University of Chicago, Bocconi University, UCLA, New York University, the Stockholm School of Economics, and the Institute for International Economic Studies.