The Value Added by Technology

Abstract

The KTC model’s algorithm proposed is now applied to different economic sectors with the goal of computing the value added by technology as well as the values added by knowledge and by capital. This chapter starts with comparing results from economic sectors in the Portuguese economy during 1996–2003, showing how differently they depend on technology and how that dependence changes along the economic cycle of expansion and recession. An example of unexpected results is realizing that a sector like computer and related activities (72) has a very small dependence on technology, being about 70 % dependent on knowledge, what is similar to the sector of education (80). Then, the algorithm is applied to eight European countries analyzing their manufacturing sectors from 1995 to 2008 (the peak of the last expansion period) and for 2009 and 2010, when the European economy started a new downturn. It is also shown how this exercise contributes to understand and to better interpret the economic cycle characteristics, and how they depend on industrial policies.