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Innovation, Capital Accumulation and Economic Transition


  • Keuschnigg, Christian

    (Department of Economics, Institute for Advanced Studies, Vienna - CEPR)

  • Kohler, Wilhelm

    (Department of Economics, University of Linz)


This paper explores some links between trade, human capital investment and innovation-based growth in the context of Eastern European economies in transition. Specifically, we calibrate a two region model with trade in differentiated high-tech products and a homogeneous traditional commodity. Human capital, or the quality of the skilled labour force, as well as physical capital are accumulated. Human capital remains finite in the long-run but depends endegenously on education and is an important determinant of the innovation rate. Transition is modelled as one of the two regions starting out with initial conditions that are grossly displaced from a reference path of balanced growth. The paper then evaluates and compares the effects of a number of policy instruments, such as trade liberalization and subsidies for schooling and industrial research, for the process of transition as well as long-run growth and welfare.

Suggested Citation

  • Keuschnigg, Christian & Kohler, Wilhelm, 1996. "Innovation, Capital Accumulation and Economic Transition," East European Series 33, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsrop:33

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    Cited by:

    1. Friedrich Schneider & Alexander F. Wagner & Mathias Dufour, 2003. "Satisfaction not guaranteed-Institutions and satisfaction with democracy in Western Europe," Economics working papers 2003-03, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Friedrich Schneider & Kausik Chaudhuri & Sumana Chatterjee, 2003. "The Size and Development of the Indian Shadow Economy and a Comparison with other 18 Asian Countries: An Empirical Investigation," Economics working papers 2003-02, Department of Economics, Johannes Kepler University Linz, Austria.
    3. Gerhard Palme, 1998. "Impacts of EU Enlargement on Austria's Manufacturing Sector. Effects of Eastern Opening have Stimulated Austrian Industry," WIFO Monatsberichte (monthly reports), WIFO, vol. 71(11), pages 761-769, November.

    More about this item


    Research and Development; Human Capital Accumulation; Trade and Growth; Computable General Equilibirum Model;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models


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