DP229 Fixed Investment and the Technology Gap in the UK

Author(s): Michael Beenstock, Chris Whitbread
Publication Date: March 1988
Keyword(s): Aggregate Investment, Neo classical Investment, Technology, Trade Unions
JEL(s): 423, 522, 621
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=229

United Kingdom investment is explained in terms of the international diffusion of technology, where the United States is assumed to be a technological leader and the United Kingdom a technological laggard. The gap between United Kingdom and United States capital-labor ratios is decomposed into four components: an adjustment gap, an information gap, an appropriate technology gap and a resistance gap. The factors that might influence the gap are hypothesized and it is found that the model gives a reasonable account of business investment since 1960.