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Openness, technology capital, and development

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  • McGrattan, Ellen R.
  • Prescott, Edward C.

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. Technology capital is distinguished from other forms of capital in that a firm can use it simultaneously in multiple domestic and foreign locations. A country can exploit foreign technology capital by permitting direct investment by foreign multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 6 (November)
Pages: 2454-2476

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:6:p:2454-2476

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Openness Foreign direct investment;

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  11. Thomas J. Holmes & James A. Schmitz, Jr., 1994. "Resistance to technology and trade between areas," Staff Report 184, Federal Reserve Bank of Minneapolis.
  12. Renaud Bourlès & Gilbert Cette, 2005. "Une comparaison des niveaux de productivité structurels des grands pays industrialisés," Revue économique de l'OCDE, OECD Publishing, vol. 2005(2), pages 83-117.
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