Technological novelty and productivity growth: a cliometric approach

This paper aims at providing further empirical evidence on the long-run relationship between technology and productivity by using a cliometric approach based on Granger’s causality. We test, for the first time, the sign and direction of causality between technological novelty, which is an important driver of radical technological innovations, and productivity, for the whole 20th century. Technological novelty is here proxied by the degree of component recombination of inventions. We find that both the flow and stock of Technologically Novel Inventions (TNI) have an important, but temporary, positive impact on productivity, and that these inventions are originated by a handful of leading technological fields, mainly concentrated in the sectors of specialized suppliers of capital equipment and in science based sectors. Our results also show that, at the aggregate level, there is no causal relationship running from productivity to TNI, which suggests that radical technologies are exogenous, i.e., independent of productivity variations. However, we also find that, at technological field level, productivity has a positive or negative impact on TNI, depending on the field. This instead suggests that some radical technologies are endogenous. We conclude by discussing implications of these results on the productivity stagnation since the 1970s and the current productivity slowdown.(This abstract was borrowed from another version of this item.)