Working Paper: CEPR ID: DP957
Authors: William Easterly; Robert King; Ross Levine; Sergio Rebelo
Abstract: 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.
Keywords: technology adoption; growth; economic policy
JEL Codes: E62; O1; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government policies, such as taxation (H29) | Economic growth (O00) |
| Tax on income (H24) | Decline in growth rates (O49) |
| Subsidies for human capital accumulation and technology adoption (J24) | Enhance growth rates (O49) |
| Trade restrictions and tariffs (F13) | Adversely affect growth (I15) |
| Higher policy uncertainty (D89) | Shift of resources away from productive activities (E29) |
| Shift of resources away from productive activities (E29) | Slowing growth (O49) |