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The role of technology spillovers in convergence

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Author Info

  • M. Junaid Khawaja
  • Toseef Azid

Abstract

Purpose – The purpose of this paper is to evaluate the role of human capital technology spillovers across countries in converging their growth rates. Design/methodology/approach – This paper develops a closed form mathematical endogenous growth model and applies it to a small open economy using simulation and calibration techniques. Findings – The paper finds that human capital technology spillovers play an important role in convergence in growth rates across countries regardless of tax policy and that there will be non-convergence in levels if saving rates are differentially distorted across countries because of taxes. In addition, the exploration of the optimal tax reveals that such a structure is a consumption tax. Research limitations/implications – This paper implies that higher levels of human capital are important in attaining higher levels of per capita income. Originality/value – This paper shows that some implications for the endogenous growth model are equivalent to those from the Solow model. This implies that some empirical tests commonly used will not resolve which model is more appropriate.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Humanomics: The International Journal of Systems and Ethics.

Volume (Year): 26 (2010)
Issue (Month): 1 (February)
Pages: 53-64

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Handle: RePEc:eme:humpps:v:26:y:2010:i:1:p:53-64

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Related research

Keywords: Economic growth; Economic models; Economic theory; Fiscal policy; Taxes;

References

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  1. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
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  4. Nicholas Bull, 1993. "When all the optimal dynamic taxes are zero," Working Paper Series / Economic Activity Section 137, Board of Governors of the Federal Reserve System (U.S.).
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  14. Tamura, Robert, 1991. "Income Convergence in an Endogenous Growth Model," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 522-40, June.
  15. Antonio Ciccone, 1996. "Externalities and interdependent growth: Theory and evidence," Economics Working Papers 194, Department of Economics and Business, Universitat Pompeu Fabra.
  16. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
  17. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-50, June.
  18. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  19. del Barrio-Castro, Tomas & Lopez-Bazo, Enrique & Serrano-Domingo, Guadalupe, 2002. "New evidence on international R&D spillovers, human capital and productivity in the OECD," Economics Letters, Elsevier, vol. 77(1), pages 41-45, September.
  20. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-81, September.
  21. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  22. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
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