The Key Role of Technological Progress in Economic Growth

Topics: Economics, Innovation, Technology Pages: 2 (494 words) Published: June 4, 2013
THE KEY ROLE OF TECHNOLOGICAL PROGRESS IN ECONOMIC GROWTH

A key determinant of economic growth is technology, or ways or combining re¬sources to produce goods and services. New management techniques, scientific dis¬coveries, and other innovations improve technology. Technological advances allow the production of more output from a given amount of resources. This means that technological progress accelerates economic growth for any given rate of growth in the labor force and the capital stock. A particularly dramatic example of technolog¬ical change is provided in the Economic Insight 'Technological Advance: The Change in the Price of Light." Technological change depends on the scientific community. The more educated a population, the greater it’s potential for technological advances. Industrial coun¬tries have better-educated populations than developing countries do. Education gives industrial countries a substantial advantage over developing countries in cre¬ating and implementing innovations. In addition, the richest industrial countries tra¬ditionally have spent 2 to 3 percent of their GNP on research and development, an investment that developing countries cannot afford. The developing countries lag behind the industrial countries in developing and implementing new technology. Typically these countries follow the lead of the in¬dustrial world, adopting new technology developed hi that world once it is afford¬able and feasible, given their capital and labor resources.

Economists use the term technological progress in a very specific way: It means an economy operates more efficiently by producing more output without using any more inputs. In practice, technological progress can take many forms. The invention of the light bulb made it possible to read and work indoors at night, the invention of the thermometer assisted doctors and nurses in their diagnoses, and the invention of disposable diapers made life easier at home. All these examples and you could...
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