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The modern Solow paradox. In search for explanations

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  • Capello, Roberta
  • Lenzi, Camilla
  • Perucca, Giovanni

Abstract

More than 30 years ago, Robert Solow provided the first evidence of the paradoxical low return of technological progress to productivity. Today, in an era of radical technological changes, characterized by disruptive socio-economic transformations in businesses and society, the puzzle is far from being solved. This paper offers additional reflections on this issue. Stemming from the recognition that in European regions a productivity paradox still persists, this study systematically defines and empirically tests some of the sources that could explain the weak association between the adoption of new technologies and the growth of regional labour productivity. Our findings indicate that, in general, new technologies do have a positive impact on the productivity of the sectors of adoption. The propagation of this effect to the whole regional economy, however, is mitigated by sectoral employment reallocation effects towards less productive sectors.

Suggested Citation

  • Capello, Roberta & Lenzi, Camilla & Perucca, Giovanni, 2022. "The modern Solow paradox. In search for explanations," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 166-180.
    • Handle: RePEc:eee:streco:v:63:y:2022:i:c:p:166-180
    DOI: 10.1016/j.strueco.2022.09.013
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    Cited by:

    1. Roberto Camagni & Roberta Capello & Camilla Lenzi & Giovanni Perucca, 2023. "Urban crisis vs. urban success in the era of 4.0 technologies: Baumol's model revisited," Papers in Regional Science, Wiley Blackwell, vol. 102(3), pages 589-612, June.
    2. Yuan, Sai & Zhou, Ran & Li, Mengna & Lv, Chengchao, 2023. "Investigating the influence of digital technology application on employee compensation," Technological Forecasting and Social Change, Elsevier, vol. 195(C).

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    More about this item

    Keywords

    Productivity paradox; Regions; Intelligent automation; Advanced digitalisation;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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