The economics of network-powered growth

This paper assesses the evidence and finds strong support in the economic literature for the notion that network technology has the potential to boost economic growth permanently, sustainably enriching poorer societies. 1 The drivers of economic growth have been difficult for economists to determine; some countries prosper, while others decline or remain poor. Yet economic analysis shows that differences in total factor productivity—the know-how, processes, and technologies with which capital is utilized—rather than capital intensity are the main determinants of crosscountry differences in productivity and economic growth. Thomas Malthus posited that finite resources would constrain humans' ability to supply rising demand from growing populations. But his theory has not been borne out; knowledge and innovation have helped us do more with the resources we have. The role of policy in driving technological innovation is still subject to analytical investigation. Recent endogenous-growth theory has focused on the factors that drive technology in an attempt to understand technology's role in economic growth. They build on the notion that an increase in knowledge has the potential to positively impact capital productivity. The concept of " knowledge capital " can be treated as similar to physical capital, but is dependent on a number of factors such as cumulative R&D expenditures and capital investment. In the endogenous growth framework, new equipment also enables new ideas and innovation in technologies. For example, investing in computers induces bright ideas on how to use them. Investment in physical and knowledge capital drives increasing returns to scale in production, where more knowledge begets increased output and liberates resources for further investment: a virtuous growth spiral in which future output becomes " path-dependent. " This paper examines the evidence for endogenous growth and argues that network technology has the potential to promote such a virtuous growth path in countries at all stages of development: c11. For the purpose of this paper, network technology means a mix of wired and wireless connectivity and network services, enabling high-speed delivery, processing, and dissemination of data, as well as interactive sharing and real-time communication. This can include Internet; audio, video, and automated real-time sensing that monitors, measures, and responds to data. Network technology enhances the effective provision and delivery of private and public services as well as spatial and environmental measurement and monitoring. • In BLOCKINwealthier, BLOCKINinnovator BLOCKINcountries, BLOCKINnetwork BLOCKINtechnology BLOCKINenhances BLOCKINthe BLOCKINuptake BLOCKINof knowledge, allowing accelerated innovation, invention, and economic growth. Network technology …

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