Competing Factors at Play: Understanding the Gap Between Innovation and Productivity
Open Access
- Author:
- Zamansky, Adam
- Area of Honors:
- Finance
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Brian Spangler Davis, Thesis Supervisor
Brian Spangler Davis, Thesis Honors Advisor
Svetla V Vitanova, Faculty Reader - Keywords:
- Penn State
Innovation
Knowledge - Abstract:
- This thesis will examine the gap between the increase in innovation and knowledge in the United States, and the declining economic growth rate the country has witnessed. It examines a book called Knowledge and the Wealth of Nations, which is centered around how the development of new products and ideas have been realized as factors which induce economic growth and productivity in a nation. It goes on to analyze current economic models used for growth such as the Solow growth model, and the key variables this model leverages. Once this has been established, the thesis continues to explain what the gap is specifically referring to, and how it has developed over the past 50 years. Next there is an analysis of what is causing this paradoxical gap between increased innovation and decreasing productivity levels. The factors outlined are the United States’ decreasing population growth, economic misallocation, growing income inequality levels, a reduced level of value created by technology production in the United States, and the end of a wave of increasing returns resulting offshoring. The thesis then goes on to explain the predicted impact that AI will have on United State’s productivity levels. Finally the potential impact of public policy is highlighted, as it explores how government bodies can impact the current levels of productivity. These factors are highlighted once more in the conclusion, which takes a broader look at these obstacles, and attempts to originate ways in which the United States can restructure its economy and policies to leverage this incredible access to innovation and knowledge and boost its economic growth rate.