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The Tale of Two Traverses: Innovation and Accumulation in the First Two Centuries of U.S. Economic Growth

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  • Paul A. David

    () (Stanford University & the University of Oxford)

Abstract

Both the macroeconomic and the microeconomic evidence from U. S. economy’s experience over the past two centuries leads to a view of technological change (broadly conceived) as having not been “neutral” in its effects upon growth. The specific meaning of “non-neutrality” in this context is that technical and organizational innovation had effects upon the derived demands for factors of production, and these tended to alter the relative prices of the heterogeneous array of productive assets in the economy. By directly and indirectly impinging on relative real rates of remuneration established in the markets for particular types of human labor and skill, and for the services of specific tangible and intangible capital, “technological change” altered key conditions governing the absolute and relative growth rates of the various macroeconomic factors of production. On the other hand, because innovation exhibited strong cumulative features reflecting the influence of “localized learning,” past domestic factor market conditions exerted a persisting influence upon the globally non-neutral trajectory of American technological and organizational development. This essay thus explores two broad and related historical themes. Firstly, the nonneutrality of the impacts of innovations on the demand side of the markets for productive inputs implies that “innovation” should be understood as contributing to complex interactions among all the proximate “sources of growth.” Even though the latter are usually presented by exercises in “growth accounting” as distinct and separate dynamic elements contributing to the rise of labor productivity and per capita real output, the identification of the total factor productivity “residual” as the “contribution” of technological change is mistaken in ignoring the quantitatively important effect of successive capital-deepening “traverses” to the growth of labor productivity. The second theme underscores a fundamental contrast between the twentieth and the nineteenth century growth processes, in regard to the impacts of the predominant “bias” of the direction of innovation: the relative shift away from the accumulation of stocks of tangible reproducible capital and towards the formation of intangible productive assets by in investments in education, training and the search for new scientific and technological knowledge.

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Bibliographic Info

Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 05-022.

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Date of creation: Dec 2005
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Handle: RePEc:sip:dpaper:05-022

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Cited by:
  1. Antonelli Cristiano & Quatraro Francesco, 2007. "Shifting the Bias: How to Disentangle Creative Adoption from Radical Innovation. Empirical Evidence from Italy and the US," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200706, University of Turin.
  2. Stark, Oded & Zakharenko, Roman, 2011. "Differential Migration Prospects, Skill Formation, and Welfare," Discussion Papers 119111, University of Bonn, Center for Development Research (ZEF).
  3. Antonelli Cristiano & Quatraro Francesco, 2007. "Directed Technological change and total factor productivity. Effects and determinants in a sample of OECD Countries, 1971-2001," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200711, University of Turin.
  4. James Alm & Janet Rogers, 2011. "Do State Fiscal Policies Affect State Economic Growth?," Working Papers 1107, Tulane University, Department of Economics.
  5. Quatraro Francesco & Antonelli Cristiano, 2008. "The effects of biased technological change on total factor productivity.Empirical evidence from a sample of OECD countries," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200806, University of Turin.
  6. Hoyt Bleakley & Aimee Chin, 2009. "Age at Arrival, English Proficiency, and Social Assimilation Among U.S. Immigrants," CReAM Discussion Paper Series 0913, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.

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