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Avoiding the Trap: The Dynamic Interaction of North-South Capital Mobility and Technology Diffusion

  • Michael Hübler

This paper analyzes a stylized model of international capital mobility and diffusion of embodied technologies from North to South. The South can fall behind in terms of technologies or get trapped in a situation, in which it is unable to attract foreign capital and embodied technologies, if its absorptive capacity is too low. The paper reconciles the view that technological catching up is stronger, the larger the technology gap, with the alternative view that technological catching up is strongest at a medium technology gap. The closer the South is to the technology frontier, the more beneficial is a higher income share of foreign capital. The speed of technology diffusion is higher in small economic regions with high population densities

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1477.

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Length: 30 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:kie:kieliw:1477
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