NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Openness, Technology Capital, and Development

Ellen McGrattan, Edward C. Prescott

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.

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Document Object Identifier (DOI): 10.3386/w13515

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.

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