Openness, Technology Capital, and Development
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NBER Working Paper No. 13515
Issued in October 2007
NBER Program(s): EFG IFM ITI
In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. What distinguishes technology capital from other forms of capital is the fact that a firm can use it simultaneously in multiple domestic and foreign locations. Foreign technology capital is exploited by permitting foreign direct investment by multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.
Published: McGrattan, Ellen R. & Prescott, Edward C., 2009.
"Openness, technology capital, and development,"
Journal of Economic Theory,
Elsevier, vol. 144(6), pages 2454-2476, November.
This paper is available as PDF (280 K) or via email.
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