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Integration of Macroeconomic and S&T Policies for Growth, Employment and Technology (MACROTEC), Final Report, EUR 23108

Project ID: HPSE-CT-1999-00014


In European countries, and especially in the European Commission itself, macroeconomic policy on the one hand and science and technology policy on the other hand are almost totally detached from each other. It is widely recognised that technological change can have a significant impact on economic growth, as underlies the production function in economics and the 'linear model' of innovation studies and governmental policy-making. The reverse impact of macroeconomic conditions on technology has however been given little coherent study. The MACROTEC project thus chose to focus on this overlooked linkage.
Our initial work consisted of a large-scale literature survey, which did find many attempts to approach the issue of concern, but the literatures were scattered and mostly 'heterodox'. Data were collected both for individual countries and on a cross-country basis. Analysis of the data showed consistently at both levels that there appeared to be a pattern of causation that ran from the macro-economy to technology, and that this was at least as evident as the 'orthodox' link from technology to growth. This finding ran counter to the basic precepts underlying 'supply-side economics' and the premises behind current macro-economic policy-making in the EU and many member states. An analytical explanation is therefore given to account at the macro level for why expansion of aggregate demand may have real and sustained effects of enlarging aggregate supply. In addition, we provide some indications of 'transmission mechanisms' at the micro, meso and macro levels of how these demand changes may feed through into expanding technological achievements.
One of these 'transmission mechanisms' consists of skill changes. Our work traced the well-known pattern of exacerbated inequality in earnings in the late 20th century and related it to the 'Solow paradox' of productivity slowdown at a time of apparent radical technological change.

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