United Kingdom investment is explained in terms of the international diffusion of technology, where the United States is assumed to be a technological leader and the United Kingdom a technological laggard. The gap between United Kingdom and United States capital-labor ratios is decomposed into four components: an adjustment gap, an information gap, an appropriate technology gap and a resistance gap. The factors that might influence the gap are hypothesized and it is found that the model gives a reasonable account of business investment since 1960.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
229.