On Technology, Uncertainty and Economic Growth

It is one of the most popular and debated topics in economic science: economic growth. Where do high or low growth rates come from and how do the mechanisms that underlie economic growth work? Who gains and who loses? Uncertainty has a negative impact on economic growth, directly through negatively affecting the effectiveness of R&D, and indirectly through reducing the level of openness of a country. The process of R&D can continue indefinitely if an economy is able to constantly reduce its coss by having access to a pool of general knowledge that is sufficiently large. Dynamic welfare effects oflowering trade restrictions are much more important and much larger for an economy if it involves changing the share of new innovations and goods that are introduced. The more open a small developing economy is, the larger the dynamic welfare gains are. Obsolescence can be introduced successfully in a horizontal endogenous growth model via incorporating maintenance costs. When teh size of the maintenance cost sector increases at the expense of the production and R&D sectors, growth rates drop.

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