The Optimal Transfer of Capital and Embodied Technologies to Developing Countries
AbstractWe study the North-South diffusion of technologies embodied in internationally mobile capital in a framework of intertemporal global welfare maximization. Convergence of the growth rates of technical change in the North and South always occurs in the long-run. However, the degree to which the North-South technology gap can be narrowed depends crucially on the level of the absorptive capacity (human capital, infrastructure, legal framework, etc.) in the South. Performing own innovations in the South narrows the technology gap only in the short-run. An optimal development policy requires more capital to be allocated to the South in earlier stages of development. Allowing for optimal investment into the absorptive capacity, the absorptive capacity rises steadily with the aim to close the technology gap completely. Our results show that an optimal development policy requires FDI to be matched by investment into the absorptive capacity
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1478.
Length: 30 pages
Date of creation: Jan 2009
Date of revision:
Technology diffusion; technology transfer; capital mobility; FDI; human capital; absorptive capacity;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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