Infrastructure and General Purpose Technologies: A Technology Flow Framework

Economic growth models often refer to “general purpose technology” (GPT) and “infrastructure” as key to improving productivity. Some GPTs, like railroads and the Internet, fit common notions of infrastructure, while other likes the steam engine and the computer do not. Without a specific model of the special characteristics of infrastructures, important technology policy questions relating to openness are not addressed. Infrastructure is similar to other GPTs in its demand-side characteristics that enable a wide variety of productive activities (or uses) and generate substantial spillovers to the rest of the economy. On the supply side, infrastructure is quite different from the other GPTs. It is partially nonrival as opposed to fully nonrival, which may complicate appropriation problems and raise congestion issues. It has strong cost-side economies of scale giving less scope for using markets to provide and control it. And it exhibits tethering, meaning that different users must be physically or virtually connected for the infrastructure to function. We present a technology flow framework that clarifies these issues and provides a base for policy analysis and for defining empirical research questions.