TY  - JOUR
AU  - Stokey,Nancy L.
TI  - Catching Up and Falling Behind
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18654
PY  - 2012
Y2  - December 2012
UR  - http://www.nber.org/papers/w18654
L1  - http://www.nber.org/papers/w18654.pdf
N1  - Author contact info:
Nancy Stokey
Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL 60637
Tel: 773/702-0915
Fax: 773/834-3452
E-Mail: nstokey@uchicago.edu
AB  - This paper studies the interaction between technology, a publicly available input that flows in from abroad, and human capital, a private input that is accumulated domestically, as the twin engines of growth in a developing economy. The model displays two types of long run behavior, depending on policies and initial conditions. One is sustained growth, where the economy keeps pace with the technology frontier. The other is stagnation, where the economy converges to a minimal technology level that is independent of the world frontier.

In a calibrated version of the model, transition paths after a policy change can display rapid growth, as in modern growth 'miracles.' In these economies policies that promote technology inflows are much more effective than subsidies to human capital accumulation in accelerating growth. A policy reversal produces a 'lost decade,' a period of slow growth that permanently reduces the level of income and consumption.
ER  -