Technology and Human Development

Until the last 250 years of human history the economic growth has been little. It is estimated that before 1750, per capita income in the world doubled every 6,000 years; since then, it has doubled every 50 years. There is a consensus that this growth is mainly due to the increase in productivity through technological progress. Population growth and capital accumulation by themselves cannot account for this level of economic growth. Technological progress, hence economic growth has not been equal across countries and regions, however it dramatically increased per capita incomes on average. Technological development did not just improve the average living standards but created important changes in social, economic, and political life. Historical studies show that technological progress, productivity growth and economic growth did not benefit everybody, at least in the beginning. During the Industrial Revolution productivity increased as well as working hours but the earnings did not increase until the second half o of the 19th century. Furthermore, working conditions deteriorated. The situation that some sections of society suffers with technological progress is not restricted to the Industrial Revolution. For example, increased mechanization may lead to unemployment. One approach to this problem is that technological progress increases living standards at the end and that is the important thing. There may be some casualties along the way, but that is an inevitable price to be paid for future gains. Since the Industrial Revolution there has been opposition to technological progress when it reduces the demand for labor. Historical experience shows that with the advance of technology some tasks were eliminated, however new tasks, new jobs were created. This does not eliminate the suffering of some workers or producers. The negative effects of technological progress are not limited to labor markets. These effects can be eliminated or reduced through economic policies. For example, innovations in medicine are more curative than preventative. Government policies may direct the research in this area to more preventative innovations. Technological progress gives more market power to innovators. With the market power they create barriers to entry, and the market moves towards a monopoly. Only government policies can put a check on the tendency to reduce competition. Technologies can be classified as worker enabling or worker replacing. The former increases the productivity of workers do not replace them. Policy makers can support enabling technologies. Abramovitz and Solow are the two economists who first estimated the direct contribution of technological progress to economic growth though using different approaches. Solow measured total factor productivity (TFP), that is, the portion of output that cannot be attributed to the measured inputs of capital and labor explicitly in a model of economic growth. In the United States the average annual growth rates for the 1947-2022 period were 3.09% for output, 1.77% for labor, 3.89% for capital, and total factor productivity 0.56. However, this model does not explain or rationalize technical progress. Endogenous growth models take technological progress and productivity growth into account. In the recent versions of these models new products make the older ones obsolete; the innovator of the new product has a monopoly power for a period of time which gives incentives for R&D and innovation. The period of 1921-2016 was the one with the highest growth rate in per capita real GDP in England (2.09%), followed by the 1816-1920 period (0.9%), and 1663-1736 (0.5%) and 1737-1815 (0.3%). Estimates suggest that growth in per capita real GDP were higher during 1870-1914 (second Industrial revolution) and 1947-2023 (digital revolution). On the other hand, there is no discernible evidence that the growth in per capita real GDP was higher during 1760-1830 (1st industrial revolution) compared with periods outside of above mentioned three periods. Growth in crop yields (as a measure of productivity in agriculture) for barley, wheat and oats were not significantly different during 1760-1830. There were significant differences in growth rates among countries during the 1820-2018 period. The spread in per capita GDP figures is getting bigger every year. This can easily be seen by the distribution of countries according to GDP per capita in 1820, 1920, 1970 and 2018. These differences among countries were a result of differences in average annual growth rates in GDP, population, and per capita GDP. In the United States, using data on 340 sectors during 1987-2022 period, average annual growth rate in real output was highest in semiconductor and related device manufacturing sector (16.97%), followed by wireless telecommunications carriers (except satellite) (15.93%), and electronic shopping and mail-order houses (13.46%). During the 1987-2022 period, average annual growth rate in labor productivity was highest in semiconductor and related device manufacturing sector (17.48%) among 326 sectors, followed by computer and peripheral xiv equipment manufacturing (12.99%), and wireless telecommunications carriers (except satellite) (12.49%). In fact, top growth rates in labor productivity were observed in sectors related to semiconductors, computers, and other electronics. There is a very close relationship between sectoral labor productivity and real sectoral output. While economic growth is the expansion of the production capacity of an economy and the increase in output, development is the expansion of the capability of people to do things they have reason to value and choose to do. The expansion of capabilities have both direct and indirect effects on development. The expansion of human capabilities indirectly contributes to development by increasing productivity, raising economic growth, broadening development priorities, and bringing demographic changes in a more rational framework. The direct importance of the expansion of human capabilities in the achievement of development is its intrinsic value and its role in human freedom, well-being and quality of life. Technological progress leads to productivity increase which means higher rates of economic growth. This leads to higher income and higher levels of education and a healthier life. In turn, more educated and healthier workers are more productive. Furthermore, higher income leads to more research and development expenditures. Together with a more educated and healthier workforce there is more possibility of innovation and technological progress. Human Development Index (HDI) is a measure of development used widely. It is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living. There are empirical studies covering different countries and time periods indicating a strong relationship between productivity and economic growth and HDI or its components. Our estimates show that A one percent increase in labor productivity measured as GDP per employed leads to an increase of 0.75% of GDP in 175 countries for the period 1992-2022 taking country and time differences into account. If we use total factor productivity as the measure of technological progress, we find that one percent increase in the lagged TFP leads to a 0.5 percent increase in real GDP and a one percent increase in the growth rate of TFP causes a 0.15% increase in the growth rate real GDP. We find that the correlation between HDI and its components is very high, approximately 90%. While the relationship between HDI and education and health seems to be linear, the relationship with income is non-linear. We run various regressions where HDI is the dependent variable, and the past values of its components are regressors. We find that the relationship is significant. The rapid advancements in Artificial Intelligence (AI), 5G, cloud computing, cybersecurity, blockchain, and digital health are driving significant transformations in healthcare, finance, and urban management. These technologies are not just buzzwords but are making processes more efficient, integrated, and are impacting socio-economic factors. However, the progress and challenges in digital development also highlight the existence of the digital divide - the gap between those with access to information communication technology (ICT) and those with limited or no access. While the causality between the digital divide and socio-economic inequality goes both ways, the digital divide has become a significant determinant of income and wealth inequality both within a country and across countries globally. Mobile phone penetration has rapidly increased from 33 percent in 2005 to 110.6 percent in 2023. While 95 percent of the world population lived within mobile phone or broadband coverage, only 67 percent used the internet in 2023. Internet use by individuals skyrocketed from one billion in 2005 to 5.5 billion in 2023, with fixed broadband subscriptions increasing seven-fold and mobile phone subscriptions four times during the same period. The relationship between countries' per capita GNI and individual internet and mobile phone subscriptions is strong. As countries' income levels increase, mobile and internet use saturates the population, and the relationship becomes flat at the higher income levels. Gender inequality in the physical world is reflected in the digital world. The gap between genders from less than a percentage point in high-income countries jumps to 16 percentage points in low-income countries. Several studies show that women, limited by less expensive and sophisticated handsets, use mobile phones and the internet differently - often primarily voice and SMS- than men. The digital age gap, often called the digital divide across different age groups, primarily affects older adults who may not have grown up with current technology or who may not engage with digital tools as frequently as younger generations. This divide has significant implications for social inclusion, access to information, economic opportunities, and even health services, especially as more services move online Infrastructure quality, inclusivity of access, governmental policies, and digital proficiency are identified as major factors influencing the digital divide. Since commercial deployment began in 2019, 5G coverage has increased to 40 percent of the world population in 2023. Distribution, however, remains very uneven. Although mobile broadband deployment has been remarkably rapid, the bulk of the end-use internet traffic is still carried by fixed broadband. In 2022, 95.8 percent of internet traffic was handled by fixed broadband. While mobile internet subscriptions reached 87 per 100 people globally, only about 20 per 100 people had fixed broadband subscriptions in 2023. Fixed broadband is the more expensive service, even considering multiple users are accessing one subscription. In low-income countries, fixed broadband subscriptions can cost as much as 96 percent of per capita GNI as opposed to 7.4 percent for mobile subscriptions at about the same download speeds. In relative terms, fixed and mobile broadband are 25 to 30 times more expensive for people in low-income countries than in high-income countries. An important factor in expanding digital adoption in many countries has been the introduction of e-government to provide government services. While expanding e-government can help to expand and accelerate digital adoption in countries where the ICT infrastructure is in place and affordable, it can also widen the digital divide and exclude people experiencing homelessness, people in poverty, older adults, and those who live in remote areas without broadband access. The digital literacy, defined as essential skills for engaging with digital media, processing information, and retrieving it, is strongly related to the years of schooling - number of years an individual spends in formal education, from primary school to higher education. Schools play a crucial role in laying the groundwork for digital literacy by teaching students basic skills and introducing them to digital tools. Digital literacy encompasses a broad array of Professional computing skills and, like traditional literacy, equips individuals to attain valued outcomes in life, particularly within the contemporary digital economy. Governments, particularly those authoritarian tendencies often employ internet shutdowns and censorship for political control and suppression of information with adverse effects on freedom of expression Frontier technologies refer to innovative and advanced technological developments at the cutting edge of research and development. These technologies can significantly impact and transform various industries and aspects of society. They can disrupt existing industries, create new markets, and drive significant economic and social change. Frontier technologies emerge from the convergence of multiple fields of science and technology led by advances in computing technologies and applications. There is no unique set of frontier technologies. Rapidly developing a broad spectrum of interrelated and interdependent technologies is transforming the world. Advances in one area trigger and spur breakthroughs in others. The Frontier Technology Readiness Index (FTRI) developed by the United Nations Conference on Trade and Development (UNCTAD) measures countries’ readiness in this respect and indicates how prepared countries are to adopt and adapt frontier technologies by combining data on information and communications technologies deployment (ICT), labor skills, research and development (R&D), industrial capacity, and availability of finance. The ICT deployment and skills are the two critical components of the FTRI. There is a strong relationship between per capita GDP and FTRI scores. High-income countries can more effectively integrate advanced technologies into their economies, enhancing competitiveness and creating high-value jobs. Similarly, the Human Development Index (HDI) shows a strong correlation with the FTRI. The impact of frontier technologies—such as artificial intelligence (AI), robotics, biotechnology, and advanced materials—on employment is profound and multifaceted. One of the most immediate impacts is the potential displacement of jobs through automation. Roles that involve routine tasks, whether physical or cognitive, are particularly vulnerable. The demand for high-skilled workers tends to increase with the adoption of frontier technologies, potentially widening the wage gap between highly skilled and less skilled workers. This shift can exacerbate income inequality unless robust educational systems and training programs help workers upskill or reskill.