Economic Growth and Change
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Economic Growth and Change

National and Regional Patterns of Convergence and Divergence

Edited by John Adams and Francesco Pigliaru

The pursuit of economic growth is at the top of every nation’s policy agenda at the end of the 20th century. This authoritative and comprehensive book goes beyond the narrowly-based convergence model of economic growth by considering global, national and regional patterns of growth from a comparative perspective.
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Chapter 5: R & D, technology and economic growth

Livio Cricelli and Agostino La Bella


Page 127  5. R&D, technology and economic growth  Livio Cricelli and Agostino La Bella  5.1 INTRODUCTION  It is generally believed that economic growth in the modern era has been grounded on the exploitation of scientific knowledge. As a result, national science policies, at  least in the most developed countries, have tended to become more strongly interventionist and more explicitly com­mitted to planning and management in this field,  even in a period of general retreat of government influence.  The foundations of modern growth theory were laid in the 1950s by R. Solow (1957) and M. Abramovitz (1956). They found that capital accumulation and changing  labour conditions explained only a fraction of the secular growth of labour productivity; the residual is attributed to exogenous technical progress.  Solow’s growth model, based on standard neoclassical assumptions (perfect competition, maximizing behaviour, no externalities, positive and decreasing marginal  productivities, production functions homogeneous of degree one, and so on) describes an economy whose output grows in response to larger inputs of capital and  labour.  Together, the above assumptions give to neoclassical growth models two crucial implications. First, as the stock of capital expands, growth slows and eventually halts:  to keep growing, the economy must benefit from continual infusions of technological progress. Yet this is a force that the model itself makes no attempt to explain, and  is left exogenous (Solow’s residuals). The second implication is that poorer countries should grow faster than rich ones. The reason is diminishing returns: since poor  countries start with less...

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