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Openness, Technology Capital, and Development

Author

Listed:
  • Edward Prescott

    (ASU and Federal Reserve Bank of Minneapolis)

  • Ellen McGrattan

    (Federal Reserve Bank of Minneapolis)

Abstract

In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. What distinguishes technology capital from other forms of capital is the fact that a firm can use it simultaneously in multiple domestic and foreign locations. Foreign technology capital is exploited by permitting foreign direct investment by multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.

Suggested Citation

  • Edward Prescott & Ellen McGrattan, 2008. "Openness, Technology Capital, and Development," 2008 Meeting Papers 111, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:111
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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