Inputoutput multipliers, general purpose technologies, and. On the macroeconomic effects of major technological change. General purpose technologies gpts like ai enable and require significant complementary investments. We present preliminary empirical results from industrylevel growth accounting in. Whole eras of technical progress and economic growth appear to be driven by a few key technologies, which we call general purpose technologies gpts. This highlights the importance of reforming the management and funding of.
Of course, since the golden age there have been big changes in the global economic environment. One of them is about general purpose technologies gpt, a theme that briefly rose to prominence a decade ago in the literature of the economics of technological change of which lipsey was one pioneer. The authors argue that long term economic growth is largely driven by pervasive technologies now known as general purpose gpts. General purpose technologies and economic growth mit press. How technology affects economic growth mercatus center. Examples of gpts are the steam engine, electricity, and the computer. In comparison to the literature on the relationship between growth and human development, the literature on what generates economic growth is vast. Growth based on general purpose technologies, nber working papers 4854, national bureau of economic research, inc. We develop a model that shows how this can lead to underestimation of productivity growth in a new gpts early years and, later, when the benefits of intangible. The impacts of technological invention on economic growth. Handbook of economic growth vol 1, part b, pages 1061.
These results are consistent withindeed, predicted bythe simple model that we present. In this paper, we offer a new view of general purpose technologies, building on the historical as well as on the recent literature, enquiring more in deep the definitional problems related to the gpts and. Available through all good bookshops, or direct from. A key, neglected, aspect is the general purpose nature of the new information technologies. The emergence of 5g is a fulcrum in the evolution of mobile technology from a technology that had transformative impact on personal communications to a true gpt that promises to transform entire industries and economies. The impacts of technological invention on economic growth a. General purpose technologies take time the relatively slow adoption of it systems and ebusiness. The recent changes in the us wage structure are often linked to the new wave of capitalembodied information technologies. Information and communications technology as a general purpose technology. The economic literature started to recognize the heterogeneity characterizing the nature of different technologies, introducing the concept of general purpose technologies. Gpts are seen as infrequent but pervasive exogenous technological shocks able to generate low frequency longterm positive effects on economic growth by transforming the productivity potential of economies jovanovic and rousseau, 2005. General purpose technologies, handbook of economic growth, in. General purpose technologies and economic growth the mit press. Information and communications technology as a general.
In fact, the literature on general purpose technologies provides this insight in relation to economic growth bresnahan and trajtenberg, 1992. In principle, the model and data in this paper can answer questions such as, if there is a one percentage point improvement in productivity in electric power generation or in the production of information technology goods, what is the longrun overall gain in gdp. Innovation accounting statistical methods for calculating the contribution of innovationrelated factors such as research and development, technological change, greater capital intensity, and greater human capital on growth in economic output. The existing literature has emphasized either the accelerated pace or the skillbias of embodied technical progress as the driving force behind the rise in wage inequality. Although the relevance of kondratieff cycles for understanding modern economic growth remains questionable, since the early 1990s a new theoretical approach has emerged that depicts longterm growth unevenness as resulting from the emergence of general purpose technologies gpts that create long waves of economic growth jovanovic and rousseau. Basu and fernald information and communications technology as a general purpose technology 3 growth. They establish an alternative to the standard growth models that use an aggregate production function and then introduce the concept of gpts, complete with a study of how these technologies have transformed the west.
General purpose technologies relative prices of computers and semiconductors, 1959 1999 100 000 all price indexes are divided by the output price index. Information technology it is an example of a general purpose technology that has the potential to play an important role in economic growth, as well as other dimensions of economic and social development. This model was developed by robert solow, who in 1987 received the nobel prize for this model and other contributions to the theory of economic growth. Purpose technologies gpts that create long waves of economic growth j ovanovic and rousseau, 2005. General purpose technologies, handbook of economic growth.
Thus, patents have become an easily accessible measure of inventive output, offering insight into the contribution of knowledgeintensive activities to economic growth. General purpose technologies gpts and their relevance to. Thus the steam engine and the electric motor may have played such a role in the past, whereas semiconductors and computers may be. Electricity diffusion in the manufacturing sector before wwii figures and tables from this paper figures. It is essentially an impression derived from considering the conflicting analyses of the problem of artificially stimulating economic growth in the socalled underdeveloped areas of the world. Technologies like the steam engine, railroads, electricity and the internal combustion engine, and steel are all examples of general purpose technologies that drove economic transformation and growth in the past. Pdf general purpose technologies and economic growth lisa. The second is the rise of the west and the beginning of sustained economic growth in europe in the eighteenth and nineteenth centuries. However, a decentralized economy will have difficulty in fully exploiting the growth opportunities of gpts. Bureau of economic research web site, and more recent information can be obtained from the u. General purpose technologies and military and defenserelated procurement in his book, is war necessary for economic growth military procurement and technology development, vernon w. General purpose technologies and economic growth mit. Development of the american economy economic fluctuations. These investments are often intangible and poorly measured in national accounts.
Current fears about job automation parallel john maynard keyness worries in 1930 about increasing technological unemployment. A gpt has the potential to affect the entire economic system and can lead to farreaching changes in such social factors as working hours and constraints on family life. Ruttan, regents professor emeritus in the department of applied economics at the university of minnesota, examines the impact of military and defenserelated. Economic transformations general purpose technologies and long term economic growth richard g. Electricity diffusion in the manufacturing sector before wwii september 2010 cristiano andrea ristuccia trinity hall cambridge, uk solomos solomou faculty of economics university of cambridge cambridge, uk. Trajtenberg1 department of economics, stanford university, stanford, ca 94305. General purpose technologies and economic growth the mit. General purpose technology and wage inequality springerlink. The impact of digital technology on society and economic. A new view of general purpose technologies econstor. General purpose technology and wage inequality harvard dash.
Apr 11, 2019 a new paper by mercatus scholars james broughel and adam thierer assembles the literature on growth theory and accounting to paint a picture of just how important technology is to longterm growth. Technological change, and growth o4 economic growth and aggregate productivity. Aug 03, 2014 this paper challenges the usefulness of general purpose technology gpt theory as a way of conceptualizing the relationship between technological advances and longterm historical economic growth. Pdf general purpose technologies and economic growth. General purpose technologies and economic growth elhanan. Both literatures agree that technological change is a major driver of. General purpose technologies gpts are drastic innovations, such. For decades, this virtuous gpt cycle made computing one of the most important drivers of economic growth.
In a previous paper helpman and trajtenberg, 1994 we incorporated this notion into a grossmanhelpman growth model, and explored the economywide dynamics that a gpt generates. Chapter 9 globalisation, new technology and economic. General purpose technologies and economic growth unep. The researchers stress that the pace of automation also will depend on nontechnical factors, including the costs of automation, regulatory barriers, and social acceptance. The emergence of 5g is a fulcrum in the evolution of mobile. History and theory alike suggest that general purpose technologies gpts, such as the steam engine or electricity, may play a key role in economic growth. Thus the steam engine and the electric motor may have played such a role in the past, whereas semiconductors and computers may be doing as much in our era. Historically, much of it follows the neoclassical growth model of solow 1956, followed by barro. Usa btelauiv university, telaviv, israel nber abstract whole eras of technical progress and growth appear to be driven by a few general purpose technologies gpts, such as the steam engine, the electric motor, and semiconductors. He was awarded the sshrc gold medal for distinguished lifetime achievement in 2005 and in 2011 he received one of the. This diagnosis of the ills of growth economics is somewhat difficult to defend. General purpose technologies and long term economic growth richard lipsey, kenneth carlaw and clifford bekar won the 2006 schumpeter prize for distinguished writing on evolutionary economics. Can general purpose technology theory explain economic.
Generalpurpose technologies gpts are technologies that can affect an entire economy gpts have the potential to drastically alter societies through their. Among the most prominent are rapid globalization combined with a new world division of labour associated with the rise of asia, the advent of a new general purpose technology gpt based on. Established through pervasive adoption across multiple industries, gpts are often catalysts for transformative. Various eminent authorities argue that for this purpose the. The neoclassical model of economic growth describes an economy in which a single homogeneous output produced two inputs. We present preliminary empirical results from industrylevel growth. Two main approaches to studying economic growth over the very longrun are found in the literature.
Does the concept of general purpose technologies help explain periods of faster and slower productivity advance in economies. General purpose technologies and their implications for. But economic disruption and uncertainty can fuel social anxiety about the future, with political consequences. We do this by concentrating on gpt theorys main and most intuitive claim. Interest in measuring and modeling the sources of economic growth increased among economists in the mid20th century. The decline of computers as a general purpose technology.
To date much of the work on gpts has been theoretical in nature. Blockchain technology genome sequencing robotics energy storage artificial intelligence forecasts are inherently limited and cannot be relied upon. Examples of gpts are the steam engine, electricity. General purpose technologies and economic growth semantic.
Traditionally, the economics of computing were driven by the general purpose technology model where universal processors grew everbetter and market growth fuels rising investments to refine and improve them. The contributors to this volume are concerned with the type of drastic innovation called general purpose technologies gpts. Book chapter full text access chapter 17 longterm economic growth and the history of technology. Inputoutput multipliers, general purpose technologies. The digital revolution should be accepted and improved rather than ignored and repressed. Electricity diffusion in the manufacturing sector before wwii view open files authors publication date. Pdf this paper evaluates the diffusion of electricity within the context of a gpt. Economists have long been interested in how technological change affects longrun growth and aggregate fluctuations, yet it remains most often treated as. Ict and other general purpose technologies and, hence, in enabling further innova tion. Can general purpose technology theory explain economic growth. The history of earlier general purpose technologies demonstrates that even with shortterm dislocations, reorganizing the economy around revolutionary technologies generates huge longterm benefits. Gpt based account of british economic growth and also to place the impact of steam.
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