The long-term evolution of technological complexity and its relationship with economic growth

Innovations are widely accepted as fundamental drivers of economic growth by increasing productivity and creating new markets. However, empirical evidence on the long-term relationship between technological progress and economic growth remains scarce, with few studies considering shifts in technologies' fundamental properties, such as their degree of complexity. Yet, higher levels of complexity are argued to increase technologies' economic potential, and consequently, ignoring this dimension of technologies provides an incomplete picture of innovations’ growth effects. We address this research gap by exploring the relationship between economic growth and technological complexity over more than 170 years in the United States (US). Utilizing patent data, the concept of the complexity frontier, and partial wavelet analysis, we find that economic growth has not been driven by patented innovation and technological complexity for most of this period. However, since the beginning of the ICT revolution in the 1990s, it has significantly contributed to GDP growth. One Sentence Summary: Technological complexity drives economic growth. - Empirical quantification of the technological complexity frontier of inventive activities in the USA over 170 years - Description and discussion of technologies' development in terms of technological complexity over time - Causal identification of patent numbers not being predictors of the USA's long-term economic growth - Causal identification of technological complexity being a positive predictor of economic growth for the years after 1990 but not in the years before - Complements the contemporary understanding of knowledge complexity as a competitive advantage