Abstract:
This study examines the importance of technological progress to aggregate economic
growth in South Africa. Quantifying the contribution of technological progress to
economic growth has become imperative, considering the outcome of a simple growth
accounting exercise. The findings of this exercise indicate that the contribution of
technological growth to aggregate economic growth increased substantially, over the
past three decades. Economic growth is modelled through a Cobb-Douglas production
function, employing Kalman filter to determine the evolution of the Solow residual over
time. The Solow residual represents both technological progress and structural change.
According to the Kalman filter results, technological progress is characterised by an
upward trend since the 1980s with a steeper slope during the 2000s. Our results show
that technological progress has become a factor as important to production as capital
stock and labour; fact that policy makers should take into consideration to boost
economic growth.
