The Impact of Technology on Economic Growth: Some New Ideas and Empirical Considerations

Ivo De Loo, Statistics Netherlands, Heerlen, and Luc Soete, Department of Economics and Maasticht Economic Research Institute on Innovation and Technology (MERIT), Maastricht University, Maastricht, The Netherlands

1/01/2005
(Original Publish Date: 1999)

R&D based models relating technical change and economic growth have been unsuccessful in explaining the recent productivity paradox: R&D efforts have risen continuously in advanced countries during the postwar period whereas productivity growth has, if anything, declined. Several explanations of the paradox are offered, together with empirical ways of testing them. The notion that R&D efforts are more and more attributed to product differentiation, thus enlarging consumers' welfare while simultaneously exhibiting only limited effects on economic growth, looks very promising in explaining the productivity paradox.