BY-

ATREYA AGRAHARI
EC 51
1112231034


Role Of

Economics

In The

Technology Sector
Economics - The social science that deals with the production,
distribution, and consumption of goods and services and with the theory
and management of economies or economic systems.
Technology-- Technological artifacts are products of an
economy, a force for economic growth, and a large part of everyday
life. Technological innovations affect, and are affected by, a society's
cultural traditions.

Introduction
KUALA LUMPUR IN THE 1880s- A SWAMPY AREA KUALA LUMPUR 120 YEARS LATER
education,
constant
practice and
learning
result in expertise,
new ideas and
development of
human capital,
technology and high
quality goods
development
and evolution of
the various
industries, skills
and economic
activities
ECONOMIC
GROWTH
POPULATION
GOVERNMENT
IDEAS AND
TECHNOLOGY
HUMAN
CAPITAL
TRADE
PRIVATE
SPENDING
JUSTICE
AND
ECONOMIC
FREEDOM
1. Concept of a production function and sources of economic
growth

Y
it
= A
it
. F( K
it
, H
it
, L
it
) i = country t =time

Y= output over time= Gross National Product
K

= Stock of Capital

;

H

= Human capital; L = Labour
A = Total Factor Productivity TFP

Growth rate of output over time is a function of
a) Rate of growth in capital stock =investment
b) Rate of growth in human capital
c) Rate of growth in labor
d) growth in total factor productivity (TFP) or technological
change/technological progress




The Theory
Determinants of TFP: TFP is commonly identified with level of
technology but actually incorporates a wider variety of factors such as
internal organization of firms, level of worker effort, knowledge, ideas,
R&D, technical efficiency, economic structure

Capital intensity (K/Y) and labor productivity (L/Y) depend in the long-run
on TFP growth or technological change.

Technological change can be embodied in the quality of new capital
goods =capital-embodied technical change

2. TFP and concepts of efficiency
Productive efficiency: Resources are allocated such that firms are
producing at lowest possible costs, producing output by minimizing use
of inputs, cannot produce more of one good without producing less of
another

Allocative efficiency: Resources are allocated to their best possible uses ,
producing right goods at the right prices for the right people



3. Increasing returns to scale: a given proportional change in
inputs leads to a more than proportional change in output.

4. Structural change: An economys structural transformation
changes the composition of output and the contributions of
each sector to GDP and employment over time.

5. Globalization:
a. free movement of factors of production and goods and services
b. the integration of national economies into the international
economy through trade, foreign direct investment, capital
flows, migration, the spread of technology, and military
presence .

Globalization

Democracy and
politics
Media and
communication
Technologies

Culture

Economics
Globalization Interdisciplinary subject which relates to all branches
and fields of knowledge
In our days no one sphere of life, including economic sphere can act
independent and isolated. All processes and events should be
examined and understood in the broad sense of economic, political,
social, ecological and demographic context, taking into account their
interdependence.

Main objectives of the study of Globalization of economics and
development:
THINK GLOBALLY AND ACT LOCALLY!
So knowledge about globalization is important part of your academic
knowledge !
The main spheres of life are inseparable;
Economics is one of these spheres of life;
The technological development fosters the development of
all other spheres;
Simultaneousness development of communication
technologies, culture, education and etc.;
Trends for universality of development;
Economic activity of the society has changed;
The universal and national development are tightly bounded
Our choice is to examine globalization of economics in the
broad context of development !
Globalization of Economics and Development


The manufacturing sector offers special opportunities for both
embodied and disembodied technological progress.
Rapid capital accumulation is associated with embodied technological
progress, as new generations of capital goods embody the latest state of
the art of technology.
Disembodied technological progress refers to changes in the knowledge
of product and process technologies in firms and in the economy as a
whole.
Since, the industrial revolution, technological advance has been
concentrated in the manufacturing sector and diffuses from there to
other economic sectors such as the service sector.
Jobs growth in the technology sector is beating the rest of the economy.
Since 2004, employment growth in the hi-tech sector had grown at a pace
three times faster than the private sector as a whole and has proved more
resilient through the recession-and-recovery period, according to the report
commissioned by Engine Advocacy, a tech start-up lobbyist and conducted
by the Bay Area Council Economic Institute.

6. Technological Change
Technology & its classification
By and large, the service sector is a consumer of technology rather than a
developer of technology.
IT accounts for more than 80 percent of the technology purchased by service
sector firms and is the predominant focus of service sector RDT&E (research,
development, test, and evaluation) staffs.
For expository purposes, the following characterization has been made in the
broad technology frameworks in the
banking,
home entertainment,&
health care industry
Information and Communications Technologies
(ICT)
Interconnectivity thru ICT has enabled a Global village
ICTs have demystified the essence of location & distance
One can do business anywhere, anytime
Completely new societies & social relationships being created
through social networks
Key driver to socio-economic transformation










Impact on GDP by increasing ICT usage by
10%
0.5
1.0
1.5
P
e
r
c
e
n
t
a
g
e

p
o
i
n
t
s

0.43
0.72
0.60
0.81
0.77
1.12
1.21
1.3
8
Fixe
d
Mob
ile
Inter
net
Broadb
and
The impact of increasing
ICT usage to GDP is
higher in Low and Middle
Income Countries than in
High- Income economies
(World Bank, 2009)
(fixed and mobile
telephony, internet and
broadband)









Countries that have adopted ICTs have experienced faster growth in per capita income
as shown in the graph below.

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9000
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Period (Years)
P
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C
a
p
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a

I
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c
o
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e

i
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U
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$
Uganda Kenya Ghana Malaysia
Growth trend in Internet Access & Usage
2007 2008 Jun-09 Jun-10 Dec-10 Jun-11
Internet Subscriptions 15,500 22,000 58,648 541,000 645,000 934,758
Internet Users 1,000,000 2,500,000 2,800,000 3,500,000 4,000,000 4,662,240
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
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4,500,000
5,000,000
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1,000,000
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Business Process Outsourcing (BPO)
Business process outsourcing (BPO) is a subset of outsourcing
that involves the contracting of the operations and
responsibilities of specific business functions (or processes) to
a third-party service provider.
IT-enabled Services and BPO identified as key priorities for
job creation especially for the youth

ICT is pivotal to the socio-economic development by
increasing job and wealth creation. To achieve this, we need
to invest heavily in the Sector with particular emphasis on the
following areas: BPO; E-Government; IT Parks; Software and
hardware development
The ICT sector is a powerful catalyst in addressing the needs
of low-income communities in developing countries. ICT s
have played an import role in firm and macro-level growth, as
they enable people to enhance their knowledge and skills;
identify, apply, and qualify for better paying jobs; use their
disposable income more wisely; and tap into broader markets
for their goods and services. In developing countries, ICTs
offer tremendous potential to eliminate or at least work
around a number of critical obstacles to economic growth.
ICTs enable a wide range of economic opportunity benefits
for users, and technological innovation is a key to
accessibility.



Estonia-- a leader in technology
WHEN Estonia regained its independence in 1991,
less than half its population had a telephone line
and its only independent link to the outside world
was a Finnish mobile phone concealed in the
foreign minister's garden. Two decades later, it is a
world leader in technology. Estonian geeks
developed the code behind Skype and Kazaa (an
early file-sharing network). In 2007 it became the
first country to allow online voting in a general
election. It has among the worlds zippiest
broadband speeds and holds the record for start-
ups per person. Its 1.3m citizens pay for parking
spaces with their mobile phones and have their
health records stored in the digital cloud. Filing an
annual tax return online, as 95% of Estonians do,
takes about five minutes.
How did the smallest Baltic state develop such a
strong tech culture? . Free Wi-Fi became
commonplace. Rubber stamps, carbon paper and
long queues gave way to e-government. A
nationwide project to equip classrooms with
computers followed and by 1998 all schools were
online and many more things followed.It basically
used technology.


India & Technology
Two Stages of Economic Reforms
The pro-business measures of
1980, initiated by Gandhis
(Indira and Rajiv) removed
price controls and reduced
corporate taxes.

The economic liberalization of
1991, initiated by then Indian
prime minister P. V.
Narasimha Rao and his
finance minister Manmohan
Singh. It removed restrictive
license policies, initiated
disinvestments and ended many
public monopolies. It also
facilitated the foreign direct
investment in many sectors
including infrastructure and
technology.

Now-
The earlier efforts
India's industrial economy continues
to invest heavily in advanced
technology initiatives such as digital
communications and space research.

India's energy requirements are met
by oil, most of which is imported
despite the growth of indigenous
production and hydroelectric
schemes, mostly based amid the
powerful northern rivers. Mining is a
relatively small sector, but does
produce iron ore and cut diamonds
for export. India's main industrial
development has been in
engineering, especially transport
equipment (a major export earner),
iron and steel, chemicals, electronics
and textiles.
Some Problems



Indias economy has been fuelled by the growth in
the technology sector in the recent past. A large part
of this growth is dependent on the outsourcing or
off shoring of key business processes and software
development activity (and related services) by large
global corporations and other organizations. Hence, the
global slowdown has also affected the business climate
within India and the growth rate of the Information
Technology (IT) and Information Technology Enabled
Services (ITES) sector is also experiencing the tremors
of the global recession. The Indian IT software and
services industry which has seen a Compounded Annual
Growth Rate (CAGR) of around 30% over the last three
or four years is now projected to grow at 20%.
Experts suggest that the performance of the Indian
IT software and services and ITES industry, while
impacted by US economic slowdown, will be
catalyzed by a revival in technology spending.
India being one of the worlds fastest-growing tech
markets, thriving mainly on exports is also experiencing
the tremors of the global economic crisis. IT spending as
a percentage of revenue normally varies from 3.5% in
manufacturing companies, 5-6% in global retail chains
to about 9.5% in the banking industry. These could see
marginal decline as companies will tend to hold spends
on new IT deployments.
Recession pulls
China and India combined graduate 950,000 engineers yearly. US
produces 70,000 engineers per year.
More people in the USA will graduate with sports-exercise degrees
than electrical engineering degrees.
USA is loosing interest in the basics-math, manufacturing, hard
work, savings and becoming a postindustrial society that specializes in
consumption and leisure

BUT
China and India represent a 2.3 billion people with a significant
number of highly skilled engineers with low salaries in comparison
with Western standards.
USAs top 1% of earners now receive 16% of all income, up from
8% in 1980. The USA invests 2.6 % of its GDP on higher education,
compared with 1.2% and 1.1% in Europe and Japan, respectively.
US remains by far the most attractive destination for students,
nearly 30 % of the total number of foreign students globally.
The US economy is excellent at taking technology and turning it
into a product that people buys.



Can developing countries progress
technologically under such brain drain
conditions ?
Balance is the besttechnological growth should
be sustainable developmentuse the resources
but protect your environment too !!