Why is technology important for growth?

A technology tells a producer how to organise their inputs in order to make a good or service. Technology can cover many different things, such as: computers and other capital goods (where the information is contained in a box so the producer does not have to worry about understanding the methods); scientific theories; or ways of running an office. The broadness of the term and apparent intensive use in producing goods in developed economies suggest that it should be important for growth.

Econometricians who have measured its impact often say that it is. Getting technologies that increase output or technologies that combine well with other technologies has been found by some studies to be responsible for over half of economic growth worldwide. There is much uncertainty in the results. The way technology is usually measured in these estimations understates its role compared with a more commonsense understanding of its contribution, as if a new technology’s seller gets the extra income from the technology’s use, the extra income is said to be due to increases in capital rather than technology.