Economic Growth

CHAPTER-TWO

REVIEW OF LITERATURE

Theoretical review

2.1.3. Technology and Theories of Economic Growth As most recent theories of economic growth suggest a significant role for technological change (differing rates of broad technological adaptation are, for example, the driving force behind divergence in Romer’s (1990) model). The definition of “technology” used by Romer or by growth accountants in general spreads far beyond “physical things that are invented”, however. This is because the impact of “technology” is generally measured by total factor productivity (Ibid). “Technology” as defined by growth accountants thus includes not just new products and processes but also “business technology“(management techniques and systems). “Political technology“(forms

According to Psachara Pools (cited in Fasica 2003), economic development is considered as a qualitative change of the economy that involves an institutional transformation. This institutional and behavioral transformation could largely be attained through Technological adoption and development and also education.

2.1.1.4. Technological progress and Education

Technological progress and education have enormous relationship, and that education produces a human capital that will be responsible to create and improve the quality of products and way of production in relation with the ongoing socio-economic and cultural lifestyle. To explain how technical progress can emerge in a society, there are different approaches which are used. The most renowned approach on the significance of innovation was developed, that implicitly shows how technical progress emerges in a process called “creative destruction” (Arthur, 2009).

The Schumpeterian Paradigm: “Creative Destruction”

The crucial notions in the “Schumpeterian Paradigm” are that output growth requires the processes of invention and innovation, and that creative destruction must occur to allow for the implementation of these new

So, the skilled labor becomes relatively more important in operating this sophisticated tech, and the need for human capital development becomes a crucial factor for a continued growth. An educated work force is more adjustable to innovations on the job. Human capital is the accumulated knowledge and skills of the work force. Acquiring knowledge and skills can be achieved through the means of formal education, on the job training, and learning by doing. In general, education should have large public benefits in the process of becoming an advanced economy (Arthur,