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Catching Up and Falling Behind

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  • Nancy Stokey

    (University of Chicago)

Abstract

This paper studies the interaction between technology, a publicly available input that flows in from abroad, and human capital, a private input that is accumulated domestically, as the 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.

Suggested Citation

  • Nancy Stokey, 2012. "Catching Up and Falling Behind," Working Papers 2012-015, Becker Friedman Institute for Research In Economics.
  • Handle: RePEc:bfi:wpaper:2012-015
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    File URL: https://econresearch.uchicago.edu/sites/econresearch.uchicago.edu/files/BFI_2012-015.pdf
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    References listed on IDEAS

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    Cited by:

    1. Wang, Yong, 2015. "A model of sequential reforms and economic convergence: The case of China," China Economic Review, Elsevier, vol. 32(C), pages 1-26.
    2. Felicitas Nowak-Lehmann D. & Elena Gross, 2015. "What effect does development aid have on productivity in recipient countries? An analysis using quantiles and thresholds," Ibero America Institute for Econ. Research (IAI) Discussion Papers 232, Ibero-America Institute for Economic Research.
    3. Fabian Goessling, 2018. "Human Capital, Growth, and Asset Prices," CQE Working Papers 6918, Center for Quantitative Economics (CQE), University of Muenster.

    More about this item

    Keywords

    growth; technology; human capital; miracle; lost decade;

    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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