Technological sources of economic growth in Europe and the U.S.
Abstract
This paper assesses the role of different sources of technological change as determinants of economic growth in a group of selected OECD countries during the period 1980–2010. We consider three different sources of growth: neutral technical change associated with Total Factor Productivity, investment-specific technical change (ISTC) embodied in capital assets, and improvements in the quality of labor services generated by human capital accumulation. The contribution to growth of each of these sources is computed using two different approaches: the standard (statistical) growth accounting and the structural growth decomposition obtained from a general equilibrium growth model. We found that the effect of ISTC dominates that of neutral technology and human capital in all of the countries considered. On average, more than 50% of productivity growth is explained by ISTC. Contributions to growth from ICT and non-ICT technical change are in general of similar magnitude.
Keyword : output and productivity growth, growth accounting, investment-specific technological change, neutral technological change, human capital
How to Cite
Molinari, B., & Torres, J. L. (2018). Technological sources of economic growth in Europe and the U.S. Technological and Economic Development of Economy, 24(3), 1178-1199. https://doi.org/10.3846/20294913.2017.1280557
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Lucas, R. E. 1988. On the mechanics of economic growth, Journal of Monetary Economics 22(1): 3–42. https://doi.org/10.1016/0304-3932(88)90168-7
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OECD. 2001. Measuring capital. A manual on the measurement of capital stocks, consumption of fixed capital and capital services. Paris, OECD.
Oliner, S.; Sichel, D. 2000. The resurgence of growth in the late 1990s: is information technology the story?, Journal of Economic Perspectives 14(4): 3–22. https://doi.org/10.1257/jep.14.4.3
Oliner, S.; Sichel, D. 2003. Information technology and productivity: where are we now and where are we going?, Journal of Policy Modeling 25(5): 477–503. https://doi.org/10.1016/s0161-8938(03)00042-5
Oulton, N. 2007. Investment-specific technological change and growth accounting, Journal of Monetary Economics 54(4): 1290–1299. https://doi.org/10.1016/j.jmoneco.2006.02.004
Rodríguez, J.; Torres, J. L. 2012. Technological sources of productivity growth in Germany, Japan, and the United States, Macroeconomic Dynamics 16(1): 133–150. https://doi.org/10.1017/S1365100510000489
Samaniego, R. M. 2006. Organizational capital, technology adoption and the productivity slowdown, Journal of Monetary Economics 53(7): 1555–1569. https://doi.org/10.1016/j.jmoneco.2005.06.002
Schmitt-Grohe, S.; Uribe, M. 2011. Business cycles with a common trend in neutral and investmentspecific productivity, Review of Economic Dynamics 14(1): 122–135. https://doi.org/10.1016/j.red.2010.07.001
Schreyer, P. 2002. Computer price indices and international growth and productivity comparisons, Review of Income and Wealth 48(1): 15–31. https://doi.org/10.1111/1475-4991.00038
Solow, R. 1956. A contribution to the theory of economic growth, Quarterly Journal of Economics 70(1): 65–94. https://doi.org/10.2307/1884513
Solow, R. 1957. Technical change and the aggregate production function, Review of Economics and Statistics 39(3): 312–320. https://doi.org/10.2307/1926047
Stiroh, K. 2002. Information technology and U.S. productivity revival: what do the industry data say?, American Economic Review 92(5): 1559–1576. https://doi.org/10.1257/000282802762024638
Timmer, M.; van Ark, B. 2005. Does information and communication technology drive EU-U.S. productivity growth differentials?, Oxford Economic Papers 57(4): 693–716. https://doi.org/10.1093/oep/gpi032
Uzawa, H. 1965. Optimum technical change in an aggregative model of economic growth, International Economic Review 6(1): 18–31. https://doi.org/10.2307/2525621
Vijselaar, F. W.; Albers, R. M. 2002. New technologies and productivity growth in the Euro area. ECB Working Papers No. 122.
Ark, B. van; Inklaar, R.; McGuckin, R. 2003. ICT and productivity in Europe and the United States. Where do the differences came from?, in The Conference Board and Growth and Development Center of the University of Groningen, Economics Program Working Paper Series (EPWP), 03–05.
Bakhshi, H.; Larsen, J. 2005. ICT-specific technological progress in the United Kingdom, Journal of Macroeconomics 27(4): 648–669. https://doi.org/10.1016/j.jmacro.2004.03.004
Coe, D.; Helpman, E.; Hoffmaister, A. 2008. International R&D Spillovers and Institutions. IMF Working Paper, WP/08/104.
Colecchia, A.; Schreyer, P. 2002. ICT investment and economic growth in the 1990’s: is the United States a unique case? A comparative study of nine OECD countries, Review of Economic Dynamics 5(2): 408–442. https://doi.org/10.1006/redy.2002.0170
Cummins, J. G.; Violante, G. L. 2002. Investment-specific technical change in the U.S. (1947–2000): measurement and macroeconomic consequences, Review of Economic Dynamics 5(2): 243–284. https://doi.org/10.1006/redy.2002.0168
Daveri, F. 2002. The new economy in Europe, 1992–2001, Oxford Review of Economic Policy 18(3): 345–362. https://doi.org/10.1093/oxrep/18.3.345
De Jong, D. N.; Ingram, B. F. 2001. The cyclical behavior of skill acquisition, Review of Economic Dynamics 4(4): 536–561. https://doi.org/10.1006/redy.2000.0124
Fernald, J. G. 2012. A quarterly, utilization-adjusted series on total factor productivity. Federal Reserve Bank of San Francisco. Working Paper, 2012–09.
Frantzen, D. 2000. R&D, human capital and international technology spillovers: a cross-country analysis, The Scandinavian Journal of Economics 102(1): 57–75. https://doi.org/10.1111/1467-9442.00184
Gollin, D. 2002. Getting income shares right, Journal of Political Economy 110(2): 458–474. https://doi.org/10.1086/338747
Gort, M.; Greenwood, J.; Rupert, P. 1999. Measuring the rate of technological progress in structures, Review of Economic Dynamics 2(2): 207–230. https://doi.org/10.1006/redy.1998.0046
Greenwood, J.; Krusell, P. 2007. Growth accounting with investment-specific technological progress: a discussion of two approaches, Journal of Monetary Economics 54(4): 1300–1310. https://doi.org/10.1016/j.jmoneco.2006.02.008
Greenwood, J.; Hercowitz, Z.; Krusell, P. 1997. Long-run implication of investment-specific technological change, American Economic Review 87(3): 342–362.
Hercowitz, Z. 1998. The ‘embodiment’ controversy: a review essay, Journal of Monetary Economics 41(1): 217–224. https://doi.org/10.1016/S0304-3932(97)00065-2
Hulten, C. 1992. Growth accounting when technical change is embodied in capital, American Economic Review 82(4): 964–980. http://www.jstor.org/stable/2117353
Jalava, J.; Pohjola, M. 2002. Economic growth in the new economy: evidence from advanced economies, Information Economics and Policy 14(2): 189–210. https://doi.org/10.1016/s0167-6245(01)00066-x
Jorgenson, D. W. 1966. The embodiment hypothesis, The Journal of Political Economy 74(1): 1–17. https://doi.org/10.1086/259105
Jorgenson, D. W. 2001. Information technology and the U.S. economy, American Economic Review 91(1): 1–32. https://doi.org/10.1257/aer.91.1.1
Jorgenson, D. W.; Ho, M. S.; Stiroh, K. J. 2005. Growth of U.S. industries and investments in information technology and higher education, in NBER volume: C. Corrado, J. Haltiwanger, D. Sichel (Eds.). Measuring capital in the new economy. University of Chicago Press.
Jorgenson, D. W.; Stiroh, K. J. 2000. Raising the speed limit: U.S. economic growth in the information age, Brooking Papers on Economic Activity 1: 125–211. https://doi.org/10.1353/eca.2000.0008
Jorgenson, D. W.; Gollop, F. M.; Fraumeni, B. M. 1987. Productivity and U.S. economic growth. Cambridge: Harvard University Press.
Lipsey, R. G.; Bekar, C.; Carlaw, K. 1998. What requires explanation?, in E. Helpman (Ed.). General purpose technology and economic growth. MIT Press.
Lipsey, R. G.; Carlaw, K. 2000. What does total factor productivity measure?, International Productivity Monitor, 1 (Fall), unabridged version.
Lucas, R. E. 1988. On the mechanics of economic growth, Journal of Monetary Economics 22(1): 3–42. https://doi.org/10.1016/0304-3932(88)90168-7
Melnikas, B. 2010. Sustainable development and creation of knowledge economy: the new theoretical approach, Technological and Economic Development of Economy 16(3): 516–540. https://doi.org/10.3846/tede.2010.32
Molinari, B.; Rodriguez-Lopez, J.; Torres, J. L. 2013. Information and communication technology over the business cycle, B.E. Journal of Macroeconomics 13(1): 933–963. https://doi.org/10.1515/bejm-2013-0064
OECD. 2001. Measuring capital. A manual on the measurement of capital stocks, consumption of fixed capital and capital services. Paris, OECD.
Oliner, S.; Sichel, D. 2000. The resurgence of growth in the late 1990s: is information technology the story?, Journal of Economic Perspectives 14(4): 3–22. https://doi.org/10.1257/jep.14.4.3
Oliner, S.; Sichel, D. 2003. Information technology and productivity: where are we now and where are we going?, Journal of Policy Modeling 25(5): 477–503. https://doi.org/10.1016/s0161-8938(03)00042-5
Oulton, N. 2007. Investment-specific technological change and growth accounting, Journal of Monetary Economics 54(4): 1290–1299. https://doi.org/10.1016/j.jmoneco.2006.02.004
Rodríguez, J.; Torres, J. L. 2012. Technological sources of productivity growth in Germany, Japan, and the United States, Macroeconomic Dynamics 16(1): 133–150. https://doi.org/10.1017/S1365100510000489
Samaniego, R. M. 2006. Organizational capital, technology adoption and the productivity slowdown, Journal of Monetary Economics 53(7): 1555–1569. https://doi.org/10.1016/j.jmoneco.2005.06.002
Schmitt-Grohe, S.; Uribe, M. 2011. Business cycles with a common trend in neutral and investmentspecific productivity, Review of Economic Dynamics 14(1): 122–135. https://doi.org/10.1016/j.red.2010.07.001
Schreyer, P. 2002. Computer price indices and international growth and productivity comparisons, Review of Income and Wealth 48(1): 15–31. https://doi.org/10.1111/1475-4991.00038
Solow, R. 1956. A contribution to the theory of economic growth, Quarterly Journal of Economics 70(1): 65–94. https://doi.org/10.2307/1884513
Solow, R. 1957. Technical change and the aggregate production function, Review of Economics and Statistics 39(3): 312–320. https://doi.org/10.2307/1926047
Stiroh, K. 2002. Information technology and U.S. productivity revival: what do the industry data say?, American Economic Review 92(5): 1559–1576. https://doi.org/10.1257/000282802762024638
Timmer, M.; van Ark, B. 2005. Does information and communication technology drive EU-U.S. productivity growth differentials?, Oxford Economic Papers 57(4): 693–716. https://doi.org/10.1093/oep/gpi032
Uzawa, H. 1965. Optimum technical change in an aggregative model of economic growth, International Economic Review 6(1): 18–31. https://doi.org/10.2307/2525621
Vijselaar, F. W.; Albers, R. M. 2002. New technologies and productivity growth in the Euro area. ECB Working Papers No. 122.