Abstract
R&D based models relating technical change and economic growth have been
unsuccessful in explaining the recent productivity paradox: R&D efforts have
risen continuously in advanced countries during the postwar period whereas
productivity growth has, if anything, declined. Several explanations of the
paradox are offered, together with empirical ways of testing them. The notion
that R&D efforts are more and more attributed to product differentiation, thus
enlarging consumers' welfare while simultaneously exhibiting only limited
effects on economic growth, looks very promising in explaining the productivity
paradox.