Technological change is obviously a main factor behind growth in modern capitalist economies. As such, it is subject to much debate, both in the academic and the policy context. In the academic environment, the event of new growth theory (for example, Romer (1986) and Grossman and Helpman (1991); for an overview see Verspagen (1991b)) has put the issue of endogenous technological change back into the centre of attention. Policy debates around technological and economic competitiveness in the European Community are now more relevant than ever, with ‘traditional’ forms of integration (like the ERM) finding less and less support.
The impact of technological progress on economic activity is manifold. New technologies create and destroy jobs, have an impact on the quality of work, cause structural change, have an influence on specialization and trade-patterns, provide ‘windows’ of opportunity for backward nations, or, on the other hand, tend to push them further into (relative) poverty. Key to most of the discussions around the influence of technological innovation, however, are the opportunities it provides for long-term growth. The topic of sustainability of long-run growth is also crucially related to technological change.
The exact relation between technological change and economic growth, however, is hard to grasp with the current theoretical and empirical tools, and the data available for analysis. This chapter, nevertheless, focuses exactly on this question. The aim is to analyse the impact of technological change on long-run growth, by means of statistical analysis of the time series and cross-country data. Of course, a statistical analysis is limited by its very nature, and therefore many (crucial) aspects of the relation under investigation will not be covered.