DP957 Policy, Technology Adoption and Growth

Author(s): William Easterly, Robert G King, Ross Levine, Sérgio Rebelo
Publication Date: May 1994
Keyword(s): Economic Policy, Growth, Technology Adoption
JEL(s): E62, O1, O40
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=957

This paper describes a simple model of technology adoption which combines the two engines of growth emphasized in the recent growth literature: human capital accumulation and technological progress. Our model economy does not create new technologies, it simply adopts those that have been created elsewhere. The accumulation of human capital is closely tied to this adoption process: accumulating human capital simply means learning how to incorporate a new intermediate good into the production process. Since the adoption costs are proportional to the labour force, the model does not display the counterfactual scale effects that are standard in models with endogenous technical progress. We show that our model is compatible with various standard results on the effects of economic policy on the rate of growth.