Proximate Sources of Growth: Capital and Technology

This chapter outlines how the development, diffusion and adoption of new technologies have shaped economic growth. Several major technological phases are identified, which differ from periods distinguished by global wars or major changes in growth patterns. Before 1940, large-scale industrialization and new technologies originated in the United States, diffusing to western European countries. Outside the Western core different development strategies were deployed. Only after 1940, countries in western Europe largely caught up to American productivity levels. The combination of technology diffusion and export-led growth in Japan, Korea, Taiwan, and, more recently, China and India have enabled significant growth in living standards. The changes in cross-country income-level inequality have also had their within-country counterparts. The more recent period of IT-enabled growth primarily benefited high-skilled workers in Europe and the US, while low- and middle-skilled workers not only met competition from machines, but also from workers in low-wage countries.