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When Does a Developing Country Use New Technologies?

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Author Info

  • Olivier Bruno

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - Université Nice Sophia Antipolis [UNS] - CNRS : UMR6227)

  • Cuong Le Van

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Benoît Masquin

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - Université Nice Sophia Antipolis [UNS] - CNRS : UMR6227)

Abstract

We develop a model of optimal pattern of economic development that is first rooted in physical capital accumulation and then in technical progress. We study an economy where capital accumulation and innovative activity take place within a two sector model. The first sector produces a consumption good using physical capital and non skilled labor. Technological progress in the consumption sector is driven by the research activity that takes place in the second sector. Research activity which produces new technologies requires technological capital and skilled labor. New technologies induce an endogenous increase of the Total Factor Productivity of the consumption sector. Physical and technological capital are not substitutable while skilled and non skilled labor may be substitutable. We show that under conditions of the adoption process of new technologies, the optimal strategy for a developing country consists in accumulating physical capital first; postponing the importation of technological capital to the second stage of development. This result is due to a threshold effect from which new technologies begin to have an impact on the productivity of the consumption sector. However, we show that once a certain level of wealth is reached, it becomes optimal for the economy to import technological capital toproduce new technologies.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00101361.

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Date of creation: Aug 2009
Date of revision:
Publication status: Published, Economic Theory, 2009, 40, 2, 275-300
Handle: RePEc:hal:journl:halshs-00101361

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00101361
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Related research

Keywords: economic development; technical progress; skilled labor; non skilled labor; total factor productivity ; new technology; developing countries;

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  1. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-31, September.
  2. Dana, Rose-Anne & Le Van, Cuong, 2003. "Dynamic Programming in Economics," Economics Papers from University Paris Dauphine 123456789/416, Paris Dauphine University.
  3. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  4. Le Van, Cuong & Saglam, H. Cagri, 2004. "Quality Of Knowledge Technology, Returns To Production Technology, And Economic Development," Macroeconomic Dynamics, Cambridge University Press, vol. 8(02), pages 147-161, April.
  5. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
  6. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  7. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
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