A technology gap approach to why growth rates differ

Abstract

This paper contains a discussion and test of the technology gap approach to development and growth. The basic hypotheses of the theory are tested on pooled cross-sectional and time-series data for 25 industrial countries for the period 1960-1983. The sample includes, in addition to 19 OECD countries, 6 of the most important industrial economies from the non-OECD area. The findings of the paper confirm that there exists a close correlation between the level of economic development, measured as GDP per capita, and the level of technological development, measured through R&D or patent statistics. Furthermore, for the group of 25 countries as a whole, technology gap models of economic growth are found to explain a large part of the actual differences in growth rates, both between countries and periods. As expected, both the scope for imitation, growth in innovative activity and efforts to narrow the gap (investment) appear as powerful explanatory factors of economic growth. However, when the non-OECD countries, and later USA and Japan, are removed from the sample, the explanatory power of the technology variables, especially growth in innovative activity, diminishes.