Caribbean Economic Development
Karen_2
Unit7econ.pdf
ECON3501
CARIBBEAN ECONOMIC
DEVELOPMENT
TECHNOLOGY, TRAINING AND EDUCATION FOR DEVELOPMENT
RESOURCE MATERIALS
Levitt, Kari; Witter, Michael (1996). The Critical Tradition of Caribbean Political Economy: The
Legacy of George Beckford. Kingston. Ian Randle Publishers
Beckford; George (2000) Persistent Poverty; Underdevelopment in the Plantation Economies
of the Third World. UWI Press.
Todaro Michael & Smith Stephen; C. (2011) 11th Ed. Economic Development. Pearson
Education & Addison-Wesley
Bhagwati Jagdish (2004). In Defence of Globalization, Oxford University Press
Blackman; Courtney. (2005). The Practice of Economic Management: Caribbean Perspective
Kingston: Ian Randle Publishers
United Nations- UNDP, Human Development Report. World Bank-World Development
Report 2
TECHNOLOGY
It is the purposeful application of information in the design,
production, and utilization of goods and services, and in the
organization of human activities.
Technology Transfer is the term used to describe the
processes by which technological knowledge moves within or
between organizations.
International Technology Transfer refers to the way in
which this occurs between countries.
3
TECHNOLOGY
The technological knowledge that is transferred can assume various forms.
It can be embodied in goods (including physical goods, plant and animal
organisms), services and people, and organizational arrangements, or codified
in blueprints, designs, technical documents, and the content of countless
types of training.
Alternatively, it can be communicated through flows of implicit knowledge –
i.e. knowledge that has not been fully codified, and remains embodied in the
skills of people.
All these forms of knowledge may vary in a further important way. At one
end of the spectrum, the transfer involved can be concerned with the
knowledge for using and operating technology. 4
TECHNOLOGICAL INVENTION VS. INNOVATION
At the other end, it can be concerned with the knowledge necessary for changing
technology and innovating.
Technological Invention – refers to the creation of a product or introduction of a
process for the first time.
In between, transferred knowledge may involve the many different kinds of design and
engineering knowledge required to replicate and modify technologies.
Technological Innovation- refers to the improvement on or making a significant
contribution to an existing product, process or service. 5
TECHNOLOGY AND DEVELOPMENT
In international technology transfer, there is a distinction between
horizontal and vertical transfer.
Horizontal transfer is concerned with the movement of an
established technology from one operational environment to another;
for instance, from one company to another.
Vertical transfer is refers to the transmission of new technologies
from the generation during research and development activities in
science and technology organizations; for instance, to application in the
industrial and agricultural sectors. 6
TECHNOLOGY AND DEVELOPMENT
Technology transfer is an important means by which developing countries gain
access to technologies that are new to them.
For example, the acquisition of foreign technologies by East Asian newly
industrialized countries, coupled with domestic ‘technological learning’ – efforts to
accumulate the capability to change technologies – have been key factors in their
rapid technological and economic development.
However, the ability of developing countries to use technology transfers to
develop their domestic capabilities, allowing such countries to reap the social and
economic benefits of existing technologies, have been mixed.
There are wide variations between countries and between sectors within
individual countries. 7
TECHNOLOGY AND DEVELOPMENT
The disparities between – and within – developing countries in
benefiting from technology transfer suggest that the relationship
between technology transfer and the accumulation of domestic
technological capability is far from straightforward.
In other words, more technology transfer does not necessarily
lead to more technological and economic development.
The main indicators that enable the assessment of knowledge
transfers are: Technology Needs Assessment (TNA), number of
people involved in joint R & D projects, and inter-academia
collaboration. 8
TECHNOLOGY AND DEVELOPMENT
According to UNEP DTU Partnership 2015-2018 Technology Needs Assessment, the
Caribbean region concurred on five priority sectors for mitigation:
agriculture
land use change and forestry
energy
waste management
transport
Of these, the energy sector was singled out as a primary concern by 86% of the
countries. In second place was the transport sector (a priority for 32% of the
countries), followed by land use change and forestry (23%), waste management (18%),
and agriculture (15%).
9
TECHNOLOGY AND DEVELOPMENT
Technological under-achievement is a major barrier to economic
development.
A more thorough study of technological advancement and its influence
on output growth will enable us to understand not only the long-run
determinants of sustained growth, but also the short-run costs of
industrialization during the process of creative destruction.
Technological innovation and Information Communication Technologies
(ICTs) represent a way for developing world nations to foster
economic development, improve levels of education and training, as
well as address gender issues within society. 10
TECHNOLOGY AND DEVELOPMENT
ICT refers to technologies that provide access to information through
telecommunications. It is similar to Information Technology (IT), but focuses primarily
on communication technologies. This includes the Internet, wireless networks, cell
phones, and other communication mediums.
In the past few decades, information and communication technologies have provided
society with a vast array of new communication capabilities. For example, people can
communicate in real-time with others in different countries using technologies such as
instant messaging, voice over IP (VoIP), and video-conferencing. Social networking
websites like Facebook, Whatsapp and Instagram allow users from all over the world
to remain in contact and communicate on a regular basis. Learning Management
Platforms like Schoology, google classroom Zoom have rescued the proliferation of
online learning.
Modern ICTs have created a "global village," in which people can communicate with
others across the world as if they were living next door.
11
TECHNOLOGY AND DEVELOPMENT
Entrepreneurship is crucial for economic development around the
world.
Analysis from the World Bank in 2011 indicates that small businesses
create a disproportionate share of new jobs. They generate new ideas,
new business models, and new ways of selling goods and services.
Wireless technology and ICT infrastructure development is also vital
for entrepreneurship and small business development.
Many popular global apps that have become household names were
birthed from entrepreneurial ventures. 12
DRIVING FORCES OF INNOVATION AND TECHNOLOGICAL
ADOPTION
According to Mitropoulos, Panagiotis & Tatum, C. (2000) the four forces that drive innovation are:
competitive advantage,
process problems,
technological opportunity, and
institutional requirements.
These forces change over time and drive the diffusion of a technology in the industry.
13
TECHNOLOGY & DEVELOPMENT
In many emerging nations, it is a major challenge to
gain access to capital and market information.
Developing nations specifically do not have functioning
infrastructure or much support in the way of financial
resources.
14
TECHNOLOGY AND DEVELOPMENT
The evidence shows that innovative activities today are still highly
concentrated in few industrial countries.
Generally, developing countries do not engage in relevant amounts of
Research & Development (R&D).
Most of the time, they are technological followers whose technical
progress eventually relies upon the ability to adopt any appropriate
innovations produced by advanced countries.
Hence, understanding international technology spill-overs becomes a
crucial issue in explaining economic development. 15
TECHNOLOGY & DEVELOPMENT
There is a well entrenched ‘stylized fact’ that the higher the level of
investment in research and development (R&D) in an economy, the
higher will be the rate of growth.
This assumption, similar to the market failure argument for
Government intervention, lies behind an almost across-the-board
commitment of governments in the industrialized world (and indeed, in
emerging and even developing economies) to support businesses’ R&D
ventures as well as the commercialization of publicly funded research
results carried out in the higher education or public research sectors. 16
TECHNOLOGY AND DEVELOPMENT
Hence, most, if not all, government strategies on innovation and
business growth are predicated on an assumption that “technological
development drives growth”.
Neo-classical (Solow 1956) growth theory assumes that the level of
output is determined by the amount of available labour and fixed
capital interacting within the framework of a given technology available
to all and determined ‘outside of the economic system’.
Hence, the economy converges on a unique long run stable growth
path determined by the growth of the labour force and ‘technical
progress’. 17
TECHNOLOGY AND DEVELOPMENT
18
From an economic development perspective, the neo- classical growth model leads to the convergence (or catching-up) hypothesis: that there should be a systematic tendency for poorer countries or regions to grow faster than richer ones, since the capital-labour ratios of the former (poorer countries) are below the long-run optimum.
Therefore, there is room for technological improvements that can drive economic growth.
Whilst such convergence does occur in the case of certain countries or regions, there is no evidence of across the board ‘catching-up’.
TECHNOLOGY AND DEVELOPMENT
As some regions and countries manage ‘structural adjustment’ over time
better than others, this suggests that other factors (such as imperfect
competition, incomplete appropriability of returns from investment,
international trade interdependence) are important determinants of how
much an economy will invest in technology.
A second school of thought, called endogenous growth theory, does not
take the rate of technological progress as a given but rather assumes that
private investment in R&D is the central source of technical progress
leading to increasing return to scale.
In this model, total factor productivity growth is due to a faster pace of
innovation and extra investment in human capital. 19
TECHNOLOGY AND DEVELOPMENT
Moreover, it assumes that technology has a partly public
good nature, or in others words there are technology
spill-overs between firms in the R&D process.
Hence, appropriate government policies can permanently
raise growth rates particularly if they lead to a higher
level of competition in markets and a higher rate of
innovation.
However, empirical testing of endogenous growth theory
has not entirely confirmed these predictions suggesting
that there are other factors influencing growth. 20
TECHNOLOGY AND DEVELOPMENT
Technology, and more generally, innovation plays a critical role in fostering
and increasing economic development potential.
There is a need from the policy perspective to understand the types of
benefits that can accrue from both public and private sector investment into
technology.
Such benefits can include new processes/products, knowledge spill overs,
human capital formation, productivity growth, reduced environmental
damage or resource depletion, etc.
Technology may improve job-satisfaction and life-satisfaction in ways that
cannot be easily measured in economic terms (e.g. improving work
standards, removing 'drudgery', reducing accident rates, etc). 21
CHANNEL OF ECONOMIC BENEFIT FROM RESEARCH
1. Increasing the stock of useful knowledge
2. Training skilled graduates
3. Creating new scientific instrumentation and
methodologies
4. Forming networks and stimulating social interaction
5. Increasing the capacity for scientific and technological
problem solving
6. Creating new firms 22
PRECONDITIONS FOR TECHNOLOGICAL TRANSFER AND DIFFUSION
These measures are intended to help identify possible sources of technology, acquire
the required technology, adapt it to local needs and develop the local technological
base.
Financing of technology transfer
Technology transfer through FDI
Matchmaking and provision of information on technologies
Promoting public-private partnerships
Access to venture capital and technology transfer
International alliances and transfer of technology
Measures to improve host-country absorptive and technological capacity
23
PRECONDITIONS FOR TECHNOLOGICAL TRANSFER AND
DIFFUSION
Financing of Technology Transfer
This refers to directly providing finance for technology-transfer-related
activities such as the purchasing of equipment and/or licensing of a
particular technology by developing country, firms and institutions, and
training of operators and maintenance personnel.
Financing may also support adaptation of these technologies to suit the
local conditions and standards, and the preparation of feasibility studies,
missions and project planning meetings. 24
PRECONDITIONS FOR TECHNOLOGICAL TRANSFER AND
DIFFUSION
Technology transfer through Foreign Direct Investments (FDIs)
Foreign affiliates may bring new opportunities and challenges that may encourage suppliers to
innovate. They may provide direct training to suppliers and retailers of their products and services. In
addition, the movement of manpower between different firms could transfer management and
marketing techniques. These could induce higher efficiency in the utilization of resources (e.g. human
and financial) that will entail further adaptation of competitors to survive in the new environment.
A number of countries encourage their firms to invest in developing countries through provision of
incentives. Although many of these incentives aim at promoting internationalization of their firms, in
some cases, home-country governments require their firms to show evidence of technology transfer
to developing country in order to receive the incentives, while in other cases there is no such
requirement. Some of the requirements such as training of local personnel, transfer of machinery and
equipment, linkages with the local firms and local supplier networks are considered important in
facilitating technology transfer through FDI. 25
PRECONDITIONS FOR TECHNOLOGICAL TRANSFER AND
DIFFUSION
Matchmaking and Provision of Information on Technologies
One of the main challenges faced by developing countries is to identify the most suitable technology from out of
several alternative technologies and multiple sources of technologies. This is important especially in those areas
where the technologies are changing rapidly. Matching those who possess the necessary technologies with those
that need them may be difficult and costly for developing countries with limited sources of information.
Promoting Public-Private Partnerships
Public-private partnerships present a unique opportunity for combining the entrepreneurial, innovative and
efficiency of private firms and the flexibility of public institutions to deliver services especially in neglected areas.
These partnerships so far have been in limited areas.
The partnerships in the health sector provide excellent examples of facilitating access to technologies and their
transfer. Developed country governments have provided funding to research and development (R&D) institutions
and the private sector to develop and produce drugs, vaccines and diagnostic kits. Public support is largely in
terms of financing research, conducting trials and mechanisms for delivery of services to the end users. Some of
the clinical trial sites are located in developing countries, passing on information and skills needed to manage
trials.
26
PRECONDITIONS FOR TECHNOLOGICAL TRANSFER AND
DIFFUSION
Access to Venture Capital and Technology Transfer
Venture capital plays a central role in facilitating technology development and transfer through
provision of support for product development and commercialization. Venture capitalists also provide
management support, business and marketing strategies, and match making services, among others,
that improve the success of commercializing technologies and expansion of businesses.
International Alliances and Transfer of Technology
One of the significant features of the global business environment in recent decades has been the
formation of networks involving partners in different countries, each providing complementary
support services and technologies. These networks are designed to reduce the risks and share the
costs associated with the development of new products. Such arrangements are particularly important
in areas with limited access to financing and technology. Some of these alliances may involve developed
and developing country institutions that may share key technologies. 27
PRECONDITIONS FOR TECHNOLOGICAL TRANSFER AND
DIFFUSION
Measures to Improve Host-Country Absorptive and Technological
Capacity
Many developed countries support human resource development in developing
countries by providing scholarships for higher education in their home countries.
They also provide research and equipment support to academic, research and
professional institutions in developing countries. Technical assistance is also provided
to industrial associations and government advisory bodies.
28
HUMAN CAPITAL
Human capital, according to Organization for Economic Co-operation and
Development (OECD), refers to “the knowledge, skills, competencies and other
attributes embodied in individuals or groups of individuals acquired during their
life and used to produce goods, services or ideas in market circumstances”.
It is a measure of the economic value of an employee's skill set.
This measure builds on the basic production input of labour measure where all
labour is thought to be equal.
The concept of human capital recognizes that not all labour is equal and that the
quality of employees can be improved by investing in them. The education,
experience and abilities of an employee have an economic value for employers
and for the economy as a whole.
29
HUMAN CAPITAL
Health investments are an important form of human capital investments in many
countries.
Investments can be made to reduce mortality (or death rates).
Yet, even more important are health investments that reduce morbidity (or the relative
incidence of disease).
Many diseases are not necessarily fatal, at least immediately, but may result in lower
quality of life or functionality and productivity.
We have all heard of the obesity epidemic.
Obesity increases morbidity rates (individuals of poor health or limited
functionality), even though it may take years of increased physiological stress to
produce fully lethal heart problems or strokes. 30
HUMAN CAPITAL
In many countries, mal–nourishment and other diseases (e.g.,
malaria) produces anaemia.
Children are particularly susceptible and those infected are less able
to learn (poor oxygen flow throughout their systems, but particularly
to their brains).
Investment into iron supplements to combat the anaemia are a low–
cost form of investment to raise the productive ability of the
children. 31
EDUCATION AND HUMAN CAPITAL
Education has an important positive effect on economic growth but economists are still working on
empirical hypotheses to be tested. In a report from Applied Systems (2008), there is strong evidence of
positive, statistically significant effects of education on a country’s economic development;
proving that education is the necessary (though not always sufficient) precondition for long-term
economic growth.
The human capital perspective on education is that it raises the skills of the person receiving the
education.
As a first–order effect, education raises the person’s productivity in the market place.
Education raises productivity not only in the labour market, but also in the home. Parents with more
education, are more likely to seek and use information.
Health practices, and nutrition should be higher in households with more education, even controlling
for household income. 32
Education and Human Capital
33
Education improves productivity in the household.
Most human capital is built up through education or training that increases a
person's economic productivity- that is, enables him or her to earn a higher
income.
Governments, workers, and employers invest in human capital by devoting
money and time to education and training (to accumulate knowledge and
skills).
Like any other investment, these investments in human capital require
sacrifices. People agree to make these sacrifices if they expect to be
rewarded with additional income in the future.
Education and Human Capital Governments spend public funds on education because they believe that a better-
educated population will contribute to faster development.
Positive externalities - when a person is educated they receive a private benefit but society also benefits. You can educate others and help for instance to reduce the crime rate.
Employers pay for employee training because they expect to cover their costs and gain additional profits from increased productivity and individuals are often prepared to spend time and money to get education and training, since in most countries people with better education and skills earn more.
Educated and skilled people are usually able to deliver more output or output that is more valuable in the market place, and their employers tend to recognize that fact with higher wages.
34
Education and Human Capital
35
However, economic returns to education are not always the same.
Returns to education may be lower if:
The quality of education is low or knowledge and skills acquired at school do not match
market demand. In this case investments in human capital were not efficient enough, resulting in
less human capital and lower returns to individuals and society.
There is insufficient demand for human capital because of slow economic growth. In this case
workers' human capital may be underused and under-rewarded.
Workers with lower and higher education and skills are deliberately paid similar wages to
preserve a relative equality of earnings- as used to happen in countries with centrally planned
economies. These distortions in relative wages are being eliminated as part of these countries'
transition to market economies.
Human Capital Investment
36
The national stock of human capital and its rate of increase are critical to a
country's level and rate of economic development, primarily because
human capital is the most important determinant of a country's ability to
produce and adopt technological innovations.
But investing in human capital, although extremely important, is not
sufficient for rapid economic growth.
Such investment must be accompanied by the right development strategy.
CONSTRAINTS
Debt remains a major constraint on Caribbean countries in sustaining
previous investments in education and in making new ones.
No projections for the further development and improvement of basic
education can proceed without taking into consideration increasing
public debt.
37
CONSTRAINTS
IT teachers limit the use of technology in schools
Few initiatives focusing on technology integration
Few Ministries have undertaken significant efforts to support
integration of ICT on either systemic or individual levels.
The level of ICT resources in most Caribbean education systems is
adequate to support individual teachers and students integrating
technology on an ad hoc basis.
38
TECHNOLOGY AND THE CARIBBEAN
Focus on the IT curriculum and exams
Such efforts in many cases run counter to national policy statements and to the
goals proposed by CARICOM and other regional organizations.
Schools and school systems have in many countries provided students adequate
access to technology and to courses.
Despite students’ performance on exams, these efforts typically fail to develop a
strong base of technological skill and use among students.
Focus on the IT curriculum, then, does not deliver the value expected and at the
same time, limits use of potentially valuable technology resources to support
student learning in other subjects 39
TECHNOLOGY AND THE CARIBBEAN
Caribbean countries have in many instances built systems that provide adequate access to
computers and the Internet, and have developed capacity to design, implement, and manage
educational technology projects.
To cite progress in four countries: Anguilla now ensures that all primary students have ICT skills.
Barbados and Trinidad and Tobago have conceived ambitious and comprehensive technology projects
for their secondary schools.
Dominica—hasn’t adopted an ICT-in-education policy, and has yet to pass 90 percent gross
secondary enrolment—has provided Internet-enabled computer labs in over 50 percent of both
primary and secondary schools.
Jamaican Human Employment and Resource Training Trust/National Training Agency (HEART
Trust/NTA) has established ICT support, including e-learning, for its 80,000 TVET students. 40
TECHNOLOGY AND THE CARIBBEAN
While a great deal remains to be done to integrate ICT into
operations and classrooms, Ministries of Education (MOEs) are seeing
returns on these and other investments.
Region-wide performance on the hands-on portion of the Caribbean
Secondary Education Certificate (CSEC) IT exam increased by 32
percent between 2004 and 2005
41
MIGRATION AND ITS IMPACT ON THE CARIBBEAN
For many people in the Caribbean, the search for a better life has quite often begun within the region. This
has become evident through the fact that the absolute number of foreign-born nationals originating in the
Caribbean present in another country in the sub-region has steadily increased over the last two decades.
Deteriorating economic and social conditions, high unemployment particularly for younger people and little
hope for improvements in the foreseeable future constitute the main push factors for those desperate to
leave.
It also points to a potential risk in so far as cheap labor migrants might compete with nationals for the same
jobs, and would even accept work under less favorable conditions with the implication of decreasing wage
and benefit levels for all in the long term.
In response to the needs of migrants, governments in the Caribbean have undertaken various efforts to
provide access to basic social services, such as reproductive health and education services to migrants in
their countries. However in spite of the efforts undertaken to improve, apart from living and working
conditions for migrants, a particular challenge faced is the supply of basic social and health services to
undocumented migrants who in fear of being expelled quite often hide in inaccessible squatters and illegal
settlements.
42
MIGRATION AND ITS IMPACT ON THE CARIBBEAN
In their search for higher wages and better employment, skilled professionals are on the move worldwide.
Caribbean countries like Jamaica, Cuba and Trinidad and Tobago are strong exporters of qualified labor,
particularly teachers, nurses and other health professionals. Family ties, geographic proximity and the use of
the same language make the United States and Canada and, to a lesser extent, the United Kingdom a
preferred destination for migrants from the Caribbean. Increasing job opportunities in certain sectors of
the labor market along with the hope of a prosperous life make moving north an attractive option for many
Caribbean nationals.
Whereas some governments favor the exodus of their skilled in exchange for desired remittances to boost
their economies, many countries suffer tremendous constraints in their capacities to provide equal,
qualitative and affordable social services to their populations. Worse, the continued depletion of
professionals deprives the region of its desperately needed qualified staff whose education and training
were often a considerable expense to its taxpayers. Since qualified professionals play a critical role in
sustainable development, this continuous loss threatens to paralyze progress underway in the economic and
social sectors in the region. 43
MIGRATION AND ITS IMPACT ON THE CARIBBEAN
Therefore more needs to be done to alleviate the impact of the brain drain and to provide
for attractive options at home for those who would otherwise seek greener pastures
abroad.
Research has shown that, for example, in the case of health workers an improvement in pay
and working conditions could act as an incentive to stay.
A raise in pensions, better child care, educational opportunities and recognition of the
profession are also known to be important (WHO, 2002).
With the negative consequences of the brain drain becoming more severe, the understanding
in the developed world that the negative impact of a severe shortage of professionals in the
developing world has begun to hamper local, regional and global development efforts. 44
