The dynamics of the digital economy in the United States, Europe, and Japan are rather different. Some EU countries come close to the United States as the leading OECD country in the new economy, but Japan faces particular problems in catching up digitally. Information and communication technology will affect productivity growth, production, the financial system, and trade. Setting adequate rules for the digital economy--at the national and international level--is a key challenge for industrialized countries. Moreover, cultural and organizational challenges will also have to be met.

Claude E. Barfield is a resident scholar at AEI. Gunter Heiduk is affiliated with the University of Duisburg-Essen in Germany. Paul J. J. Welfens is affiliated with the University of Potsdam in Germany.