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Learning by Investing, Embodiment, and Speed of Convergence

Author

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  • Christian Groth

    (Department of Economics, University of Copenhagen)

  • Ronald Wendner

    (Department of Economics, University of Graz)

Abstract

This paper sets up a dynamic general equilibrium model to study how the composition of technical progress affects the asymptotic speed of convergence. The following questions are addressed: Will endogenizing a fraction of the productivity increases as coming from learning by investing help to generate a low asymptotic speed of convergence in accordance with the empirical evidence? Does it matter whether learning originates in gross or net investment? The answers to both questions turn out to be: yes, a lot. The third question addressed is: Does the speed of convergence significantly depend on the degree to which learning by investing takes the embodied form rather than the disembodied form? The answer turns out to be: no. These results point to a speed of convergence on the small side of 2% per year and possibly tending to a lower level in the future due to the rising importance of investment-specific learning in the wake of the computer revolution as the empirical evidence suggests.

Suggested Citation

  • Christian Groth & Ronald Wendner, 2011. "Learning by Investing, Embodiment, and Speed of Convergence," EPRU Working Paper Series 2011-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:11-01
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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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