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Learning-by-Doing and Its Implications for Economic Growth and International Trade

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  • Mao, Zi-Ying
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    Abstract

    This paper extends the learning-by-doing model of Alwyn Young (1991), which assumes bounded learning-by-doing in each industry and knowledge spillovers, from two perspectives. First, it introduces physical capital as another factor of production in addition to labor. Second, it takes into account capital accumulation and population growth. This extended model is then used to study the dynamic effects of learning-by-doing in both autarky and two-country free trade situations. The main findings are: 1. Learning-by-doing is the source of sustainable growth in the long-run; 2. In both autarky and free trade situations, an increase in population growth rate or saving rate expedites both the growth rate of Real GDP per capita and technical progress in the long-run; 3. Compared with the autarky situation, under free trade the LDC experiences slower growth rate of per-capita output and slower technical progress, while the situation in DC is just the opposite. In addition, the effects of free trade on intertemporal welfare as well as the implications of a change in population growth rate or saving rate are also discussed based on the conclusions in Young (1991).

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    File URL: http://mpra.ub.uni-muenchen.de/40112/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40112.

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    Date of creation: 22 Jun 2012
    Date of revision: 18 Jul 2012
    Handle: RePEc:pra:mprapa:40112

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    Keywords: Learning-by-Doing; Human Capital; Technical Progress; Intertemporal Welfare; Sustainable Growth; Free Trade;

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    1. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
    2. Ronald Findlay, 1995. "Factor Proportions, Trade, and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061759, January.
    3. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    4. Bloom, David E. & Canning, David & Sevilla, Jaypee, 2004. "The Effect of Health on Economic Growth: A Production Function Approach," World Development, Elsevier, vol. 32(1), pages 1-13, January.
    5. Findlay, Ronald, 1980. "The Terms of Trade and Equilibrium Growth in the World Economy," American Economic Review, American Economic Association, vol. 70(3), pages 291-99, June.
    6. Teubal, Morris, 1973. "Comparative advantage and technological change: The learning by doing case," Journal of International Economics, Elsevier, vol. 3(2), pages 161-177, May.
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