This paper studies the conditions under which an IT revolution may
occur and have permanent effects on long-term growth. To this end,
we construct a multi-sectoral growth model with endogenous embodied
technical progress. The R&D sector expands the range of softwares.
The capital sector produces efficient capital combining hardware
with available softwares. Technological progress is therefore
embodied: New softwares can only be run on the most recent
generations of hardware. The new softwares are copyrighted during a
fixed period of time. First, we analytically characterize the
balanced growth paths of the model. Then we focus on the dynamic
response of the economy to technological shocks. Substitution
effects favorable to the IT sectors are shown to arise when
positive supply shocks affect the production of efficient capital
and/or the creation of new softwares. Positive shocks specific to
the capital sector are unable to produce effects on long-term
growth, in contrast to the shocks speci1c to the R&D sector.