ABSTRACT
This chapter explains several distinguished stylized facts of the new economy, the intrinsic inertia of the inflation rate, the low rates of productivity increase, the high rates of economic growth, the cyclical adjustment of growth rates during the emergence of the new economy. It also explains the international differences in the development of the new economy, the blurring boundaries of the firm, both in terms of outsourcing on the sales front and in the creation of innovation networks, and the increasing service component of consumer products. The chapter argues that a sound theoretical foundation of the new producer services can explain the empirical regularities of the new economy. The characteristic features of producer services are their complementarity to other factors of production, low rates of productivity growth, and a high degree of heterogeneity, which allows rents and fosters entry of innovative market entrants.
