Innovation and Economic Development

Innovation and Economic Development

The Impact of Information and Communication Technologies in Latin America

Edited by Mario Cimoli, André A. Hofman and Nanno Mulder

Information and communication technologies (ICT) are spreading fast across Latin America and the Caribbean. This trend has brought about important economic and social changes, which have largely gone unmeasured until recently. Here, analysts from the United Nations Economic Commission for Latin America and the Caribbean along with other distinguished scholars in the field of ICT, growth and productivity provide theoretical and empirical insights to the debate on the role of ICT in economic development.

Chapter 5: Growth, Productivity and Information and Communications Technologies in Latin America, 1950–2005

Claudio Aravena, Marc Badia-Miró, André A. Hofman, José Jofré González and Christian Hurtado

Subjects: development studies, development studies, economics and finance, economics of innovation, innovation and technology, economics of innovation, technology and ict

Extract

Claudio Aravena, Marc Badia-Miró, André A. Hofman, Christian Hurtado and José Jofré González* 1 INTRODUCTION Half a century has passed since Solow (1957) developed his model for analysing economic growth, which he used to demonstrate that growth was attributable to a number of sources, with capital and labour being the main factors of production. One of the main results is the role of technological progress in growth, calculated from the residual of the aggregate function for GDP and the aforementioned factors of production. Solow estimated that 87.5 per cent of the total increase in output per person-hour in the United States could be attributed to technological progress and the remaining 12.5 per cent to increased use of capital. Since the mid-1950s, numerous articles based on Solow’s concepts have sought to produce new measures of productivity, which is seen as the component that can enable countries to achieve high and sustained growth rates. The concept of multi-factor productivity (MFP) represented a major step forwards in growth analysis. Much remained to be explained, however, and many papers have attempted to reduce the residual growth component, increasing the explanatory power of factors of production. A residual estimate of the contribution of efficiency or MFP can be calculated based on an aggregate production function for GDP and using independent measurements for output and each of the factors of production. Like other residuals, MFP reflects the difficulty of specifying the function used and measuring the observed variables. Despite these and other limitations, the accounting...

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