The growth in an economy is the outcome of the combined use of factors of production. Various factors of production are used for any particular output. They obviously are divided into two categories-direct and indirect. Land, labor, capital, energy and other intermediate inputs are direct factors of production whose contribution in growth can be measured directly and separately. Their share in the growth is directly estimated. But these factors of production by themselves are not efficient that is to say that they need external assistance to become efficient. For instance, the fertility of the land would gradually decline if farmers do not put enough inputs such as seeds, irrigation, labor, fertilizer and technological knowhow. Similarly, industrial products also need both direct and indirect inputs because direct input such as labor and capital is being made more efficient with the help of indirect input such as technology. The technological knowhow is generally termed as the indirect input that makes direct inputs effective and efficient. Generally, people consider labor and capital as the only factors needed to produce goods and services. There is no doubt these inputs play the most important role in production but they need additional help to become efficient.

One way of making these factors of production efficient is the investment in human resource development. Man can develop and adopt new and innovative techniques for making labor and capital efficient. The consequence is that per unit cost of production declines with the increased use of new technology. It also enhances quality of goods and services within a fixed quantity of land, labor, capital and other intermediate input used to produce given amount of goods and services. Unfortunately, the role of technology in any type of economic activities has not yet been measured in the Nepalese economy. Hence, there is a need to assess the role of indirect factor of production (technology) in economic growth.

The hypothesis is that

the output growth depends on the growth of labor, capital and productivity. The productivity growth depends on the technological knowhow while the quantity of labor and capital can be determined by the capacity of a given economy. The role of technology in growth is overshadowed as it is not considered as one of the inputs whose role is crucial and critical to increase productivity. Only after the 1950s, Solow proposed to measure the role of technology in growth. According to Solow, output growth of an economy is defined as the sum of labor growth, capital growth and productivity growth. The labor and capital growth are measured directly taking into account the direct input but the productivity growth has been measured indirectly as

proposed by the Solow model. The rate of growth of productivity depends on

the efficiency of labor and capital. The efficiency in producing goods and services depends on the level of the technology.

However, the labor productivity measured on the simple calculation — total output divided by the number of workers — has traditionally been considered as the efficiency of an economy. This gives a rough idea of the per capita output in terms of labor. It cannot represent the total efficiency of an economy accounted over the use of technology. However, the labor and capital efficiency has been used to determine economic efficiency. The per unit output for a given amount of labor and capital has been considered as the labor and capital efficiency which is used to measure total economic efficiency. The per unit output in terms of labor and capital is the ratio of total output to labor and capital respectively. The measurement of the role of technology in the production process is known as the total factor productivity (TFP). TFP is the portion of output not explained by the amount of inputs used in the production process. It is the better measurement of overall economic efficiency as labor and capital alone are unable to capture.

The government through its fiscal policy should have to focus on increasing

the role of research and development (R&D) in promoting aggregate efficiency of the Nepalese economy. An adequate resource is needed to conduct research to increase the role of technology in the growth process. The role of R&D is immense in increasing the efficiency of labor and capital. But its role remains silent as it is unaccounted in the growth statistics. Nepal should realize the fact that it has to take the initiative to formulate a clearly defined technology policy.

There are no studies to determine the share of technology in the growth in Nepalese economy. The degree to which Nepal has adopted new and advanced technology in all its economic sectors is low due to the low investment capacity in R&D. Irrespective of its investment in this sector, there is need to conduct a study to examine the role of technology in Nepalese economic growth. It will be the food for thought for planners and policy makers to the implementers to formulate policies to enhance its role in long run growth.

Dr. Dhungel is Associate Professor, Central Department of Economics, TU

— kamal.raj.dhungel@gmail.com