Chapter 27: Discussion of Manuel Trajtenberg’s ‘Innovation Policy for Development: An Overview’
Richard R. Nelson This informed and thoughtful chapter by Trajtenberg deals with a range of topics. In these comments I will focus on two of them. One is the relative isolation of Israel’s ‘high-tech’ sector from the rest of the economy, with the former doing very well, while economic growth more generally is sluggish. The other is Trajtenberg’s observation that innovation in developing countries needs to be understood as involving a lot more than high-tech. And I will draw some connections between these two themes. The conventional wisdom these days is that economic growth is driven by technological advance in the leading industries of the era, an argument that was put forth a long time ago by Joseph Schumpeter, but which only recently has caught on widely. Trajtenberg makes the interesting observation that in recent years Israel has been doing very well in R&D-intensive industries, particularly those associated with the complex of information technologies. However, counter to the conventional wisdom, the overall growth rate of Israel has not been rapid, and there has been a tendency in recent years for the income distribution to be breaking apart, with the highly trained Israelis working in industrial R&D and related activities achieving very high incomes, but with much of the rest of the population experiencing little gains in income. Trajtenberg’s account suggests that there are two different aspects to the isolation. One is that much of the production and marketing of the new products made possible by R&D and...
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