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Knowledge technology and economic growth: recent evidence from OECD countries

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Author Info
Andrea Bassanini () (OECD, Economics Department)
Stefano Scarpetta () (The World Bank)
Ignazio Visco () (Banca d'Italia)

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Abstract

This paper discusses some of the recent developments in growth theory, doing so from the perspective of a small open economy. After setting out a basic generic model, we show how it may yield two of the key models that have played a prominent role in the recent literature, the endogenous growth model and the non-scale growth model. We focus initially on the former, emphasizing how the simplest such model leads to an equilibrium in which the economy is always on its balanced growth path. One aspect of the model is the importance of fiscal policy as a determinant of the equilibrium growth rate, an aspect that is discussed in detail. We also show how the endogeneity or otherwise of the labor supply is crucial in determining the equilibrium growth rate and its responsiveness to macroeconomic policy. But transitional dynamics are an important aspect of the growth process and indeed much research has been directed to determining the speed with which the economy converges to its balanced growth path. We discuss alternative ways that such transitional dynamics may be introduced. These include (i) restricted access to the world capital market; (ii) the introduction of government capital , and (iii) the two-sector production model, pioneered by Lucas. In the original analysis, the two capital goods relate to physical and human capital and in the international context these naturally can be identified with traded and nontraded capital, respectively. Criticism of the endogenous growth model has led to the development of the nonscale growth model. This too is characterized by transitional dynamics, which are more flexible than those of the corresponding endogenous growth model. This model is much closer to the neoclassical model; in particular, the long-run growth rate is independent of macroeconomic policy. However, since such models are typically associated with slow convergence speeds, policy can influence the accumulation of capital for extended periods of time, leading to significant long-run level effects. The discussion seeks to emphasize the adaptability of the models to a wide range of issues. A final extension addresses the impact of volatililty on growth. This has been extensively analyzed empirically and a stochastic extension of the endogenous growth model provides a convenient framework within which to interpret this research.

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Paper provided by National Bank of Belgium in its series Research series with number 200005-2.

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Length: 43 pages
Date of creation: May 2000
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Handle: RePEc:nbb:reswpp:200005-2

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ignazio Visco, 2000. "Perspectives on OECD economic integration : implications for U.S. current account adjustment : commentary," Proceedings, Federal Reserve Bank of Kansas City, pages 209-231. [Downloadable!]
  2. Nicholas Oulton, . "ICT and productivity growth in the United Kingdom," Bank of England working papers 140, Bank of England. [Downloadable!]
    Other versions:
  3. Mika Maliranta, 2001. "Productivity Growth and Micro-level Restructuring. Finnish experiences during the turbulent decades," Discussion Papers 757, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Robert Boyer, 2006. "Employment and decent work in the era of flexicurity," PSE Working Papers 2006-21, PSE (Ecole normale supérieure). [Downloadable!]
  5. Yi-Ping Tseng & Mark Wooden, 2001. "Enterprise Bargaining and Productivity: Evidence from the Business Longitudinal Survey," Melbourne Institute Working Paper Series wp2001n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  6. Gianfranco Atzeni & Oliviero Carboni, 2006. "Regional Disparity in ICT Adoption: an Empirical Evaluation of The Effects of Subsidies in Italy," Working Paper CRENoS 200608, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  7. Thomas Anderson, 2001. "Changing Patterns and Determinants of Growth," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 2(3), pages 25-30, October. [Downloadable!]
  8. Boyer, Robert, 2001. "La "nouvelle économie" au futur antérieur : histoire, théories, géographie," CEPREMAP Working Papers (Couverture Orange) 0113, CEPREMAP. [Downloadable!]
  9. Andrea Brandolini & Piero Cipollone, 2001. "Multifactor Productivity and Labour Quality in Italy, 1981-2000," Temi di discussione (Economic working papers) 422, Bank of Italy, Economic Research Department. [Downloadable!]
  10. Luigi Bonatti, 2003. "'Soft' growth and the role of monetary policy in selecting the long-run equilibrium path," Working Papers 0306, University of Bergamo, Department of Economics. [Downloadable!]
  11. Mark Weisbrot & Dean Baker & David Rosnick, 2006. "The Scorecard on Development: 25 Years of Diminished Progress," Working Papers 32, United Nations, Department of Economics and Social Affairs. [Downloadable!]
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  12. Boyer, Robert, 2000. "The French welfare : an institutional and historical analysis in European perspective," CEPREMAP Working Papers (Couverture Orange) 0007, CEPREMAP. [Downloadable!]
  13. Cigan, Heidi, 2002. "The Internet's Contribution to Progress and Growth in Germany: The Economic Impact of the Internet and the Price Structure of Access," Report Series 26072, Hamburg Institute of International Economics. [Downloadable!]
  14. Pedro Rui Mazeda Gil & Paulo Brito & Óscar Afonso, 2008. "A Model of Quality Ladders with Horizontal Entry," FEP Working Papers 296, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  15. Yougesh Khatri & Il Houng Lee, 2003. "Information Technology and Productivity Growth in Asia," IMF Working Papers 03/15, International Monetary Fund. [Downloadable!]
  16. Franz R. Hahn, 2004. "Finance-Growth Nexus and the P-Bias. Evidence from OECD Countries," WIFO Working Papers 223, WIFO. [Downloadable!]
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  17. Argandoña, Antonio, 2001. "Nueva economía y el crecimiento económico, La," IESE Research Papers D/437, IESE Business School. [Downloadable!]
  18. Horst Siebert, 2000. "The New Economy — What Is Really New?," Kiel Working Papers 1000, Kiel Institute for the World Economy. [Downloadable!]
  19. Gianfranco Atzeni & Oliviero Carboni, 2001. "The economic effects of information technology: firm level evidence from the italian case," Working Paper CRENoS 200114, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  20. Alessandra Colecchia & Paul Schreyer, 2002. "ICT Investment and Economic Growth in the 1990s: Is the United States a Unique Case? A Comparative Study of Nine OECD Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 408-442, April. [Downloadable!] (restricted)
  21. Franz R. Hahn, 2002. "The Finance-Growth Nexus Revisited. New Evidence from OECD Countries," WIFO Working Papers 176, WIFO. [Downloadable!]
  22. Bugamelli, M. & Pagano, P. & Paterno, F. & Pozzolo, A.F. & Rossi, S. & Schivardi, F., 2003. "Ingredients for The New Economy: How Much Does Finance Matter?," EIFC - Technology and Finance Working Papers 31, United Nations University, Institute for New Technologies. [Downloadable!]
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