The Political Economy of Aerospace Industries
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The Political Economy of Aerospace Industries

A Key Driver of Growth and International Competitiveness?

Keith Hartley

The Political Economy of Aerospace Industries will appeal to undergraduate and graduate students in industrial and defence economics, public choice and policy courses. It will also be of interest to researchers, policy-makers and those involved in the industry in various different capacities.
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Chapter 5: The economics of technical progress

Keith Hartley


Technical progress has been a distinguishing feature of the aerospace industry. The industry is now generally regarded as an advanced and high technology industry and one which is believed to be important for economic growth. Since its creation in 1903, it has produced aircraft which fly faster, further and higher, carrying greater loads more safely. Its technology has not only been reflected in its outputs or products but also in its development and manufacturing techniques. For economists, technical progress in the aerospace industry is a form of non-price competition which raises a number of questions. How is technical progress measured and what are its determinants? Who funds new technology? Is government a key driver; or are conflicts a major determinant? How important is the size of firm and whether markets are competitive or monopolistic? Why do aerospace firms compete on the basis of technology (non-price forms) rather than relying on price competition? Does aerospace technology ‘spin-off’ and ‘spill-over’ to other sectors of the economy? And are aerospace industries a source of economic growth as claimed by some governments? There is no single and simple indicator measuring technical progress in the aerospace industry (or any other industry). Instead, there are a variety of performance measures which provide indicators of technical progress. These include the speed of aircraft, its range, the altitude it can reach and its carrying capacity. A distinction can be made between military and civil aircraft.

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