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Technological progress and economic growth: An Australian exposition 1965 to 2015
Thesis   Open access

Technological progress and economic growth: An Australian exposition 1965 to 2015

Jake Fraser
Gaming in Social, Locative, and Mobile Media
Honours, Murdoch University
2017
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Abstract

In the last 25 years or so Australia has experienced one of the longest economic booms in history, as compared with other advanced economies. As a result, Australians are enjoying one of the world’s highest living standards and per capita income. Will Australians continue to enjoy positive economic growth for the next 25 years or so? No one could predict accurately – which is not at all helpful. However, it is possible to shed further light on the long-run sustainability of Australia’s aggregate output growth by quantifying and decomposing it. The primary aim of this dissertation is to quantify the sources of economic growth in Australia covering the period 1965 to 2015. The neoclassical growth analysis (Solow 1956; Swan 1956) will be employed to decompose Australia’s economic growth into three components. The first is due to the growth of capital input, the second is due to the growth of labour input, and the third is due to technological progress as captured by an increase in both the productivity of capital and labour, which is also known in the growth literature as total factor productivity (TFP). The Solow-Swan model not only provides a razor-edge measurement method for technological progress but of more importance, the model demonstrates that technological progress (as captured by TFP) is the engine of long-run sustainable growth (Solow 1956; Swan 1956). A positive TFP value suggests that growth is sustainable and vice versa.

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