New Growth Theory

Courses : Intermediate Macroeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion New Growth Theory The New Growth Theory is an approach that states that factors such as knowledge, technology, and innovation play an important role in spurring long-term economic growth. This theory proposes that economic growth can continue through investment in research and development, which will result in increased knowledge and technology, and ultimately produce sustainable economic growth. The New Growth Theory criticizes the Classical and Neoclassical Growth Theories for assuming that economic growth depends only on the factors of production and efficiency in their use. The New Growth Theory proposes that knowledge and technology are important factors in spurring long-term economic growth and should be a major focus in economic development policies. New Growth Theory also highlights the importance of government policies in encouraging innovation and research. Government policies such as incentives for research and development, protection of intellectual property rights, and investment in education can promote long-term economic growth through the development of technology and knowledge. In the New Growth Theory, there is the concept of "economies of scale" or "economies of scope", which states that companies can reduce production costs and increase profits by increasing their production scale or creating more diverse products. This will encourage companies to invest in research and development to achieve more efficiency and effectiveness in production. The New Growth Theory is a development of endogenous economic growth theory that focuses more on research and innovation as important factors in long-term economic growth. This theory states that by carrying out intensive innovation and research, a country can achieve faster and more sustainable economic growth. Proponents of the new growth theory believe that human capital is an important factor in long-term economic growth. They believe that humans are "innovation engines" that can generate new ideas and better technologies that can increase productivity. In addition, this theory also emphasizes the importance of investing in research and development as a way to encourage innovation. In the new growth theory, innovation is also considered as one of the important factors that can bring a competitive advantage to a country. Countries that are able to produce new technologies and create new products tend to be more competitive in the global market. In general, the new growth theory has the following characteristics: 1. Focus on innovation as an important factor in long-term economic growth 2. Seeing human resources as the main factor in generating innovation 3. Emphasizes the importance of investing in research and development as a way to drive innovation 4. View innovation as an important factor in achieving competitive advantage in the global market. An example of the application of the new growth theory is Japan. Japan is one of the countries that has been successful in applying this theory. The Japanese government has invested a lot of money in technology research and development over the years, and the result is that the country has some of the world's largest technology companies, such as Sony, Toyota, and Panasonic. Japan's success in producing new technologies and creating new products has made the country highly competitive in the global market. One example of the application of the new growth theory is the development of information and communication technology (ICT) to support economic growth. In this digital era, innovations in the ICT field such as application development, internet of things (IoT), big data, and artificial intelligence can make a major contribution to economic growth. For example, through the use of e-commerce applications, people can expand markets and increase access to global markets, thereby increasing the number of business and employment opportunities. In addition, ICT also enables efficiency and effectiveness in business processes, which in turn can increase the productivity and competitiveness of a country. The following is a case study of the application of new growth theory to the technology industry. Well-known technology companies such as Apple, Google, and Microsoft have successfully implemented new growth theory in their businesses. They have advantages in innovation and new technology development. Their strategy is to continuously innovate and create new products that can change the way people work and live. They invest most of their income in research and development (R&D) to produce new, better and more sophisticated products. Apart from that, they also built an ecosystem involving third-party application developers and business partners to generate more added value for their customers. In new growth theory, concepts such as innovation, knowledge,