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The Role of Expectations in a Specialization-driven Growth Model with Endogenous Technology Choice

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Author Info
Shiro Kuwahara () (Institute of Economic Research, Kyoto University)
Akihisa Shibata () (Institute of Economic Research, Kyoto University)

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Abstract

Extending the Kim (1989) model of endogenous labor specialization to an overlapping generations model with an endogenous technology choice, we show in this paper that, when the market size and the fixed costs associated with the technologies with labor specialization are small, the growth pattern of this economy depends on worker expectations. In other words, if workers expect low returns of specific human capital, they will not invest in such capital, and the economy will be eventually locked in an underdevelopment trap. On the other hand, if they expect high returns of specific human capital, they invest in such capital, and, as a result, the economy can exhibit long-run growth.

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Publisher Info
Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 625.

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Length: 20pages
Date of creation: Nov 2006
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Handle: RePEc:kyo:wpaper:625

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Related research
Keywords: Labor specialization; endogenous choice of technology; endogenous growth; development traps;

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Find related papers by JEL classification:
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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  2. Kim, Sunwoong & Mohtadi, Hamid, 1992. "Labor Specialization and Endogenous Growth," American Economic Review, American Economic Association, vol. 82(2), pages 404-08, May. [Downloadable!] (restricted)
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  3. Weitzman, Martin L, 1994. "Monopolistic Competition with Endogenous Specialization," Review of Economic Studies, Blackwell Publishing, vol. 61(1), pages 45-56, January. [Downloadable!] (restricted)
  4. Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, vol. 40(1-2), pages 1-22, February. [Downloadable!] (restricted)
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  7. Gary S. Murphy Becker & Kevin M., 1992. "The Division of Labor, Coordination Costs, and Knowledge," University of Chicago - George G. Stigler Center for Study of Economy and State 79, Chicago - Center for Study of Economy and State.
    Other versions:
  8. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January. [Downloadable!] (restricted)
  9. Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June. [Downloadable!] (restricted)
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  14. Redding, Stephen, 1996. "The Low-Skill, Low-Quality Trap: Strategic Complementarities between Human Capital and R&D," Economic Journal, Royal Economic Society, vol. 106(435), pages 458-70, March. [Downloadable!] (restricted)
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