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G ROWTH AND S TRUCTURAL C HANGE : T RENDS , P ATTERNS AND P OLICY O PTIONS Bart Verspagen Paper prepared for the conference on ‘Wachstums- und Innovationspolitik in Deutschland und Europa. Probleme, Reformoptionen und Strategien zu Beginn des 21. Jahrhunderts’, Potsdam, 14 April 2000 First draft, April 2000 Eindhoven Center for Innovation Studies, Eindhoven University of Technology, PO Box 513, 5600 MB Eindhoven, the Netherlands. Maastricht Economic Research Institute on Innovation and Technology, Maastricht University, PO Box 616, 6200 MD Maastricht, the Netherlands.
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1 1. Introduction On of the most researched topics in recent growth theory if the issue of convergence of productivity levels (e.g., Bernard and Jones, 1996, Benhabib and Spiegel, 1994, to name only a few of the many recent contributions). Mainstream economic theory (under which I will group both the old Solowian tradition, and the new growth models) traditionally attributes convergence to ‘transitional dynamics’, i.e., the fact that countries have not yet reached the steady state growth path that is predicted by these theories. Investment in capital goods is the main vehicle for convergence in this case, because countries with low capital-labour ratios will have high marginal returns to investment, and hence grow rapidly. In a different set of theories that are known as ‘technology gap’ theories (Fagerberg, 1994), convergence is caused by the international diffusion of technological knowledge. 1 Convergence is not only a concept with theoretical importance, however. It obviously has important policy implications. Economic growth is often seen as solution to problems such as poverty or unemployment (it may admittedly hinder other policy goals, such as a clean environment). Hence achieving high growth is an issue that is high on the agenda of many policy makers. What is high growth, however, can only be judged by referring to other countries, i.e., looking at convergence or divergence of productivity or GDP per capita levels. It has been observed that convergence in this sense was particularly strong during the postwar period in the OECD area (Verspagen, 1993). Earlier periods and/or larger country groups saw far less convergence than what was observed in the 1950s and 1960s in the OECD. In the 1970s or 1980s (depending on the precise country group), however, this rapid rate of convergence slowed down around the same time when overall growth rates of economies in the OECD began to slow down. What caused this slowdown in growth and convergence has occupied economic growth theorists ever since. This paper will attempt to provide a different perspective on this issue. It will draw on a set of theories known as neo-Schumpeterian to try to provide an explanation of the slowdown in convergence. This theory puts structural change and technology at the forefront of the analysis. It investigates the hypothesis that there have been major technological breaks behind the observed convergence trends in the 1970s and 1980s. These technological breaks relate to the introduction of a number of related basic innovations, known jointly as Information and Communication Technologies (ICT). In the neo-
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