The Nexus between Dataization and Technological Progress in General Equilibrium of Macroeconomics

Abstract

In this paper, we construct an analytical model of the data economy with empirical evidence to explain the nexus between dataization and technological progress in general equilibrium. Data originates from the dataization of firm total output and contributes to the formation and enhancement of technology. Firms use the production function with data to solve the optimal investment, while households use the endogenous interest rate from the firm problem to solve the optimal consumption. We find that dataization has a negative moderating effect on the transition of general equilibrium affected by technological progress. Policy can only facilitate a positive transition in general equilibrium by simultaneously encouraging dataization and technological progress. Furthermore, when equilibrium capital stock is in a stationary state, dataization enhances technological progress at high levels. However, when equilibrium consumption is in a stationary state, dataization enhances technological progress at low levels while weakening it at high levels. Our empirical analysis uses macroeconomic data and policy from Chinese cities between 2000 and 2021 to verify the theories proposed in this paper. We further apply the Mean Field Games in a continuous-time framework to provide an extended explanation for the nexus between dataization and technological progress in partial equilibrium.