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Catching up and falling behind

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  • Nancy Stokey

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Abstract

This paper studies the interaction between technology, a public input that flows in from abroad, and human capital, a private input that is accumulated domestically, as twin engines of growth in a developing economy. The model displays two types of long run behavior, depending on policies and initial conditions. One is sustained growth, where the economy keeps pace with the technology frontier. The other is stagnation, where the economy converges to a minimal technology level that is independent of the world frontier. In a calibrated version of the model, transition paths after a policy change can display rapid growth, as in modern growth ‘miracles.’ In these economies policies that promote technology inflows are much more effective than subsidies to human capital accumulation in accelerating growth. A policy reversal produces a ‘lost decade,’ a period of slow growth that permanently reduces the level of income and consumption. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Nancy Stokey, 2015. "Catching up and falling behind," Journal of Economic Growth, Springer, vol. 20(1), pages 1-36, March.
  • Handle: RePEc:kap:jecgro:v:20:y:2015:i:1:p:1-36 DOI: 10.1007/s10887-014-9110-z
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    References listed on IDEAS

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    Cited by:

    1. Javier Ordóñez & Hector Sala & José Silva, 2015. "Real unit labour costs in Eurozone countries: drivers and clusters," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    2. Cyn-Young Park & Rogelio Mercado Jr., 2017. "Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence," Trinity Economics Papers tep1117, Trinity College Dublin, Department of Economics.

    More about this item

    Keywords

    Growth; Technology; Human capital; Miracle ; Lost decade; O40; O38;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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