General Purpose Technologies "Engines of Growth?"

43 Pages Posted: 3 May 2004 Last revised: 4 May 2022

See all articles by Timothy Bresnahan

Timothy Bresnahan

Stanford University - Department of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Manuel Trajtenberg

Tel Aviv University - Eitan Berglas School of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: August 1992

Abstract

Whole eras of technical progress and economic growth appear to be driven by a few key technologies, which we call General Purpose Technologies (GPT's). Thus the steam engine and the electric motor may have played such a role in the past, whereas semiconductors and computers may be doing as much in our era. GPT's are characterized by pervasiveness (they are used as inputs by many downstream sectors), inherent potential for technical improvements, and innovational complementarities', meaning that the productivity of R&D in downstream sectors increases as a consequence of innovation in the GPT. Thus, as GPT's improve they spread throughout the economy, bringing about generalized productivity gains. Our analysis shows that the characteristics of GPT's imply a sort of increasing returns to scale phenomenon, and that this may have a large role to play in determining the rate of technical advance; on the other hand this phenomenon makes it difficult for a decentralized economy to fully exploit the growth opportunities offered by evolving GPT's. In particular; if the relationship between the GPT and its users is limited to arms-length market transactions, there will be "too little, too late" innovation in both sectors. Likewise, difficulties in forecasting the technological developments of the other side may lower the rate of technical advance of all sectors. Lastly, we show that the analysis of GPT's has testable implications in the context of R&D and productivity equations, that can in principle be estimated.

Suggested Citation

Bresnahan, Timothy F. and Bresnahan, Timothy F. and Trajtenberg, Manuel, General Purpose Technologies "Engines of Growth?" (August 1992). NBER Working Paper No. w4148, Available at SSRN: https://ssrn.com/abstract=282685

Timothy F. Bresnahan (Contact Author)

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Manuel Trajtenberg

Tel Aviv University - Eitan Berglas School of Economics ( email )

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+972 3640 9908 (Fax)

Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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