Technological change and growth dynamics : an analysis of UK industries
In this work we investigate the sources and growth effects of technological innovation in UK industries over the years 1966-1993. Our main finding is that technological activities are always beneficial to labour productivity growth and normally also beneficial to employment growth. Moreover, it is possible to aggregate industries into fairly stable technological clusters, and the main sources of innovation change broadly in accordance with the technological characterisation of the industry. We also analyse the effect of inter-industry demand transmissions on employment share dynamics, and find that these effects are generally important. However, demand expansions in customer industries do not always imply expanding employment shares in supplying industries, and we did not find any evident linkage between the sign of the demand effect and the technological characterisation of industries. Testing the models developed to fit observed changes in labour productivity and employment shares over the periods 1974-79 and 1979-91, we find that growth dynamics over the period 1974-79 have been more related to technological change than over the period 1979-91. In particular, pure capital deepening has been one of the main engines of growth over the period 1979-91.