A main aspect of our empirical exercise concerns the nature of the shock affect- ing the economy. The introduction of cloud computing allows firms from all sectors to reduce fixed costs in ICT and turn part of them into variable costs. In our analy- sis we focus on the reduction in the fixed cost associated with the introduction of cloud computing. The increase in the marginal cost of production is endogenous and depends on the technological choices of the firms, which decide how much hardware and software (or, generally speaking, ICT capital) to use according to their production necessities, and on the endogenous rental rate of ICT.
