Technology Part 2

Question 1

What is technological progress in modern economies?

Answer 1

The result of firms research and development (R&D) activities.

Question 2

What is spending on R&D dependent on?

Answer 2

• The fertility of the research process - how spending on R&D translates into new ideas and products
• The appropriability of research results - the extent to which firms benefit from the results of their own R&D

Question 3

What are some determinants of the fertility of the research process?

Answer 3

• Interaction between basic research and applied research
• The country’s own success rate at research
• Time

Question 4

What is excludability?

Answer 4

The ability of the owner of a piece of property to deny its use to others unless they pay for it

Question 5

How can governments encourage R&D?

Answer 5

• Spend on R&D itself
• Tax incentives for R&D
• Patents
• Grants to fund basic research at universities

Question 6

What relation does a country’s technological advancement have to it’s patent protection?

Answer 6

• Less technologically advanced nations have poorer patent protection
• Such countries tend to be users rather than producers of new technology

Question 7

Where does fast growth and convergence come from?

Answer 7

• A higher rate of technological progress - higher gA leads to higher balanced output growth (gY = gA + gN)
• Adjustment of capital per effective worker to a higher level

Question 8

Solow residual:

Answer 8

• gY - [αgN + (1-α)gK] = αgA
• also referred to as growth of total factor productivity

Question 9

Why are poorer countries poorer?

Answer 9

They have less capital per worker
- over time these countries accumulate capital faster than others

Question 10

Two key strategies used by China to improve capital accumulation.

Answer 10

• Movement of labour from countryside to city - higher productivity jobs
• Encouraging FDI and Joint Ventures

Question 11

What are institutions?

Answer 11

Set of rules, organisations, social structures and customs that govern the behaviour of individuals and firms.

Question 12

Why do economic institutions matter for economic growth?

Answer 12

Influence investment in physical/human capital, technology and the organisation of production.

Question 13

What are the most basic set of institutions that affect economic growth?

Answer 13

Property rights

Question 14

Describe the effect property rights have on economic growth.

Answer 14

• Property rights protect property from expropriation by government or other parties
• People require property rights to have incentives to undertake investment
• Good legal institutions protect property rights