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Catching Up and Falling Behind

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  • Nancy L. Stokey

    (University of Chicago)

Abstract

This paper studies the interaction between technology, which flows in from abroad, and human capital, which is accumulated domestically, as the twin engines of growth in a developing economy. Technology inflows are modeled as a pure external effect, with the rate of inflow governed by a policy parameter, a barrier, and by the average level of local human capital. Human capital, a private input, is accumulated using time and the local technology as inputs. The model produces two distinct types of long run behavior, depending on the policies in place. If the technology barrier is low and the subsidy to education is high, the economy displays sustained growth, keeping pace with the technology frontier. If the technology barrier is high and/or the subsidy to education is low, the economy stagnates in the long run, converging to a minimal technology level that is independent of the world frontier. Transition paths are computed for economies that reduce their barriers to technology adoption and/or change their subsidies to education.

Suggested Citation

  • Nancy L. Stokey, 2009. "Catching Up and Falling Behind," 2009 Meeting Papers 527, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:527
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    References listed on IDEAS

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    Cited by:

    1. Letiche, John M., 2010. "Transforming sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 32(2), pages 163-175, March.
    2. Pao-Li Chang & Chia-Hui Lu, 2010. "Risk, Learning, and the Technology Content of FDI: A Dynamic Model," Working Papers 30-2010, Singapore Management University, School of Economics.

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