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Learning by investing, embodiment, and speed of convergence

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  • Groth, Christian
  • Wendner, Ronald

Abstract

This paper sets up a dynamic general equilibrium model to study how the composition of technical progress affects the asymptotic speed of convergence. The following questions are addressed: Will endogenizing a fraction of the productivity increases as coming from learning by investing help to generate a low asymptotic speed of convergence in accordance with the empirical evidence? Does it matter whether learning originates in gross or net investment? The answers to both questions turn out to be: yes, a lot. The third question addressed is: Does the speed of convergence significantly depend on the degree to which learning by investing takes the embodied form rather than the disembodied form? The answer turns out to be: no. These results point to a speed of convergence on the small side of 2% per year and possibly tending to a lower level in the future due to the rising importance of investment-specific learning in the wake of the computer revolution as the empirical evidence suggests.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29008.

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Date of creation: 18 Feb 2011
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Handle: RePEc:pra:mprapa:29008

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Keywords: Transitional dynamics; speed of convergence; learning by investing; embodied technological progress; decomposable dynamics;

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  1. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied Technological Change, Learning-by-Doing and the Productivity Slowdown," Economics Working Papers ECO2002/12, European University Institute.
  2. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  3. Paul Evans, 1997. "How Fast Do Economies Converge?," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 219-225, May.
  4. BOUCEKKINE, Raouf & RUIZ-TAMARIT, Ramon, 2004. "Imbalance effects in the Lucas model: an analytical exploration," CORE Discussion Papers 2004008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  7. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  8. Xie Danyang, 1994. "Divergence in Economic Performance: Transitional Dynamics with Multiple Equilibria," Journal of Economic Theory, Elsevier, vol. 63(1), pages 97-112, June.
  9. Christian Groth & Karl-Josef Koch & Thomas Steger, 2010. "When economic growth is less than exponential," Economic Theory, Springer, vol. 44(2), pages 213-242, August.
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  11. Boyan Jovanovic & Peter L. Rousseau, 2002. "Moore's Law and Learning-By-Doing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 346-375, April.
  12. Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-99, June.
  13. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  14. Plutarchos Sakellaris & Daniel J. Wilson, 2004. "Quantifying Embodied Technological Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 1-26, January.
  15. Theo Eicher & Stephen J. Turnovsky, . "Transitional Dynamics in Non-Scale Growth Models," Computing in Economics and Finance 1997 105, Society for Computational Economics.
  16. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  17. Kieran McQuinn & Karl Whelan, 2007. "Conditional convergence and the dynamics of the capital-output ratio," Journal of Economic Growth, Springer, vol. 12(2), pages 159-184, June.
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