Chapter 1: Convergence and Divergence in the Global Economy: The Role of Technical Change
INTRODUCTION Of the many pieces of evidence that attest to the importance of technical change as a source of economic growth,1 perhaps the most compelling: comes from the work of economic historians. For example, Landes (1969) describes the role that new technologies played in spurring the industrial revolution, while Rosenberg (1972) provides a comprehensive survey of the relationship between technological advances and American economic growth since the early 1800s. The latter account, especially, leaves little room for doubting that the bulk of technological progress has been purposive and profit-driven. And Fogel (1964), though trying to argue that the railroads were not indispensable to American growth in the nineteenth century, nonetheless estimated that this single innovation added 5 percent to U.S. GNP by 1890. As yet, no empirical study proves that technology has been the engine of modernday growth. Still, we ask the reader to ponder the following: What would the last century’s growth performance have been like without the invention and refinement of methods for generating electricity and using radio waves to transmit sound, without Bessemer’s discovery of a new technique for refining iron, and without the design and development of products like the automobile, the air plane, the transistor, the integrated circuit, and the computer? (Grossman and Helpman, 1994, p. 32) It is precisely because of the importance thus ascribed to technical change as a source of economic growth that our view of the way in which innovations are actually generated, appropriated and spread among different countries bears...
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