Abstract for: Political System and Culture: The Critical Determinant of Technology, Innovation, and Economic Growth

Political system and culture as the climate and conditions of a strategy for technology innovation have to be critically analyzed. A simple system dynamics model is constructed to explore the process of technological change affecting the economic growth under a certain regime. Technological innovation in the model is translated into decisions those influence the stocks of capital and labor under the regime of political system and culture. This is because technology is often embodied in capital goods and labor as human capital. Furthermore, the capital-output ratio used in the model is also influenced by the political system and cultural regime. The innovation processes are represented by the decline in life of capital. The production function has a capital intensity which is affected by the average life of capital in a negative direction and by the capital-output ratio in a positive direction. The study shows that the increase in capital intensity is an important factor for economic growth. However, the technological innovation that results in an increase in capital intensity has to persist in the climate and condition of a political system and culture those support a balance between import and export level.