Class_2_Presentation

Class_2_Presentation - 1 2 Assignment 1(online – for...

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Unformatted text preview: 1. 2. Assignment 1 (online) – for Thursday 1/31 Readings for Tuesday Next week 3. a) b) Teams: Send email to Frank (ffp39) by Tuesday 1/29. Teams have 4 students. Schilling Ch 2 Porter and Stern: Location matters (on line: course documents readings for class) An additional reading will be posted if we get the © clearance. If you can name individuals you would like to work with (one note per team is enough) If you would like to be (randomly) assigned into a team. Technology and Economic Growth and Development What is development? Growth theory Role of technology in economic policy Impact of individual inventions (video) Growth… … of what? What is economic “progress”? “Human Development Index” (UNDP) Literacy Child mortality Educational attainment Life expectancy GNP HDI HDI rank 1 2 3 4 5 6 7 8 9 10 Country Norway Sweden Canada Belgium Australia 25,693 United States 34,142 Iceland 29,581 Netherlands 25,657 Japan 26,755 Finland 24,996 GDP per capita 29,918 24,277 27,840 27,178 HDI Country GDP p.c. 11 12 13 14 15 16 17 18 19 20 Switzerland 28,769 France 24,223 UK 23,509 Denmark 27,627 Austria 26,765 Luxembourg 50,061 Germany 25,103 Ireland 29,866 New Zealand 20,070 Italy 23,626 Source: hdr.undp.org GDP per capita 1971­2003 (in 2000 USD) $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 71 73 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 19 19 19 75 World Developed economies Transition economies Developing countries The least developed The least developed nations in 1975… HDI Burkina Faso 0.232 Niger 0.234 Guinea-Bissau 0.248 Mali 0.252 Chad 0.256 Gambia 0.272 Burundi 0.280 Benin 0.288 Nepal 0.289 Senegal 0.313 …and in 2000 GDP/capita growth 1975-2000 Sierra Leone -2.6 Niger -2.1 Burundi -0.7 Mozambique 1.5 Burkina Faso 1.4 Ethiopia -0.1 Guinea-Bissau 0.4 Chad (.) Central African Rep. -1.6 Mali -0.5 Countries in color appear on both lists Why doesn’t technological change help to lift these countries from poverty? Lacking skills Incentives to be entrepreneurial (& culture) Institutions, policies Property rights Corruption Taxation Import, export controls Financial system Democracy / Wars (The “New”) Theory of Economic Growth (1) Profit motives drive investments in knowledge accumulation (skills and R&D) that lead to increases in productivity Increasing returns to scale due to spillovers of knowledge Divergence in growth performance over time (1) (1) The role of private R&D investments is increasing… Figure 1-2: Percentage of R&D Funds from Industry, Government, and Other Sources, for OECD countries 1982-1998. 70% 60% 50% 40% 30% 20% 10% 0% 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Government Industry Other …and R&D investments and human capital indeed drive productivity Source: Griffith, Redding, Van Reenen: “Mapping the Two Faces of R&D: Productivity in a Panel of OECD Industries” 2000. TFP = total factor productivity. …in other words: Changes in relative productivity (compared to the US, the productivity leader) depend on investments in Education (explains about 2/3) R&D (R&D explains about 1/3 of productivity change) Countries that invested the most in R&D and higher education caught up with the US the most rapidly (go Finland!) (2) What are spillovers? Technology is knowledge (“ways of doing things”) Unintended knowledge flows = positive externalities Not taken into account in firms’ decision­making Suboptimal investments Recent research: Optimal R&D investment may be Need for policy intervention four times larger than actual! (Jones & Williams 1997) “The Two Faces of R&D” R&D influences growth of productivity through innovation… innovation yourself R&D investments increase successful AND through spillovers Easier to adopt new technology if you do R&D Similar results exist concerning human capital: helps build absorptive capacity Policy implications of the research on economic growth Countries can influence their growth rates through investment choices Since technology spills over, policies should support investment through… R&D subsidies Policies to promote R&D cooperation Training, education Institutional setup Why don’t developing countries invest? Role of institutions remains vague! Literature on National Innovation Systems Take­home message Technological innovations need to be complemented with skills/know­how as well as managerial, organizational, institutional innovations In the macroeconomy, development necessitates technological change (R&D), education (human capital), and supporting institutions The role of firms as innovators and adopters of new technology is central to growth and development Video: Great Inventions List the 5 greatest inventions in the history of the western world in your opinion What makes an invention “great”? What are the sources of these inventions – how did they come about? ...
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