Technological and Economic Decoupling in the Cyber Era

Author/Editor:

Daniel Garcia-Macia ; Rishi Goyal

Publication Date:

November 20, 2020

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 2020/257

Frequency:

regular

English

Publication Date:

November 20, 2020

ISBN/ISSN:

9781513561677/1018-5941

Stock No:

WPIEA2020257

Format:

Paper

Pages:

35

Please address any questions about this title to publications@imf.org