High Technology, Productivity and GDP Growth: Arkansas v. Silicon Valley

European policy concerns with the link between the science base,
technology transfer, and entrepreneurship developments have been given
particular impetus by the transformation of the relative growth and
productivity performance of the US economy compared to the EU and
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OECD countries in the last decades of the 20th century. Particular emphasis
has been placed here on the role attributed to technology based sectors in
that transformation5.
A few salient facts may illustrate the kind of data upon which these
emphases are based. Between 1990 and 2000 the US economy grew at an
annual average rate of 3.2%, compared with 2.0% for the EU 15 and 2.5%
for the OECD 24 (OECD 2003). This was based upon faster productivity
growth, which in contrast to the EU was combined with increased
employment. By the turn of the last century high-tech value added as a
proportion of manufacturing was 25.8% in the USA compared with an EU
mean of 8.2% and the highest EU proportion of around 20% for Ireland (EU
2001).
It is worth looking at this performance more closely however. A number of
studies have revealed that the role of technology using sectors, and
innovation in organisational and management techniques bear as close
attention as the performance of the high technology generating sectors. A
recent analysis by Robert Solow is instructive in this respect
(www.cmi.cam.ac.uk/ncn/summit-2001-videos/solow/text.html). Solow
points out that US growth in the nineteen nineties was dominated by events
from 1995. Whereas real GDP growth per person hour was 2.9% from
1947-1972, and 1.4 % from 1972-1995, it was 2.5% from 1995-20006. Thus
the recent US performance in this respect is essentially a return to very long
run trends