Integration and growth: the role of human capital and technology

Abstract

ENTEGRASYON VE BÜYÜME: BEŞERİ SERMAYE VE TEKNOLOJİNİN ROLÜ Teknolojinin ekonomik büyüme üzerindeki rolü bir çok kişi tarafõndan kabul görmüştür. Ticaret, bilgi ve teknolojik ilerlemenin ülkeler arasõnda iletimini sağlayan önemli bir mekanizmadõr. Bu çalõşmada, büyüme potansiyelini arttõran ya da sõnõrlandõran önemli bir faktör olarak beşeri sermaye üzerinde odaklandõm. Bu çalõşmanõn amacõ gelişmekte olan ülkeler ile gelişmiş ülkeler arasõndaki entegrasyonun teknolojik ilerleme ve büyüme üzerindeki etkisini analiz etmektir. Teknolojiyi üreten yabancõ ülkeler ürettikleri teknolojiyi paylaşmaya gönüllü olsalar bile, yerel kapasite bunu almaya yeterli olmayabilir. Bu fikir, modele sabit maliyet ekleyerek tezin içinde gösterilmiştir. Bu sebeple, bu alanda yapõlan çalõşmalarõn aksine, yabancõ teknolojiyi kullanmak maliyetli olarak ele alõnmõştõr. Kõsaca bu tez, entegrasyonun teknolojik büyümeyi yavaşlatmak suretiyle ekonomik büyümeyi geçiktirebileceğini öne sürmektedir. Buradaki kritik nokta, entegrasyonun büyüme üzerindeki pozitif etkisinin teknoloji maliyeti ile yok edilebileceğidir.

INTEGRATION AND GROWTH: THE ROLE OF HUMAN CAPITAL AND TECHNOLOGY The role of new technology in enhancing economic growth is widely accepted. Trade is an important mechanism through which knowledge and technological progress is transmitted across countries. In this study I have focused on human capital as an important factor which can favor or limit to exploit their growth potential. The purpose of this study is to analyze the impact of economic integration between developed and developing countries on the rate of technological change and the rate of growth. Even if foreign countries producing technology is voluntary to give their innovations, domestic capacity of countries may be insufficient to use these innovations. In this thesis, this idea is represented by inserting some fixed cost into the model. Thus, in contrast to other papers, in this study, using foreign technology is costly. In short, this thesis suggests that integration may decrease growth rate of economy by slowing down the growth rate of technology. The critical point is that positive growth effects of integration may be reversed by cost of technology available with integration. TABLE OF CONTENTS Page LIST OF FIGURES.................................................................................................. VI CHAPTER 1: INTRODUCTION...............................................................................1 1.1 Results from the Model with Costless Technology..........................................6 1.2 Results from Costly Technology.....................................................................7 CHAPTER 2: LITERATURE REVIEW .................................................................11 2.1 Introduction..................................................................................................11 2.2 From Neoclassical to Endogenous Growth ...................................................12 2.3 Variety of Product Model .............................................................................17 2.4 Review of Basic Romer Version of Endogenous Growth Model ..................24 2.4.1 Balanced Growth Equilibrium .........................................................30 CHAPTER 3: EFFECTS OF INTEGRATION WITH COSTLESS TECHNOLOGY........................................................................................................33 3.1 Introduction..................................................................................................33 3.2 Basic Model .................................................................................................35 3.2.1 Technology.......................................................................................36 3.2.2 Market Structure...............................................................................39 3.2.3 Labor Market....................................................................................42 3.2.4 Households.......................................................................................43 3.3 Steady State Analysis ...................................................................................45 3.4 Transitional Dynamics Analysis ...................................................................56 3.5 The Importance of Unskilled Labor ..............................................................65 V CHAPTER 4: EFFECTS OF INTEGRATION; TECHNOLOGY IS NOT COSTLESS ANY MORE..........................................................................................71 4.1 Introduction..................................................................................................71 4.2 Model ...................................................................................................74 4.3 Steady State..................................................................................................77 4.3.1 What if Country can not Pay The Fixed Cost ....................................79 4.3.2 Comparison of Integration with Fixed Cost and Autarky...................81 4.3.3 Comparison of Integration with Fixed Cost and without Fixed Cost..84 4.3.4 Steady State Level of Growth Rates..................................................85 4.4 Transitional Dynamics..................................................................................90 4.5 Does Fixed Cost Paid by Developing Country Affect Growth Rate of Foreign Country . ....................................................................................................94 4.6 Limitations and Extensions.........................................................................100 4.6.1 Different Marginal Productivities in the Research Sector................102 4.6.2 Endogenous Cost............................................................................105 CHAPTER 5: CONCLUSION................................................................................106 4.1 Summary of the Model with Costless Technology ......................................106 4.2 Summary of the Model with Fixed Cost ..............................................109 APPENDICES .........................................................................................................114 A. Appendix 1..................................................................................................114 B. Appendix 2 ..................................................................................................115 C. Appendix 3 ..................................................................................................118 D. Appendix 4..................................................................................................123 REFERENCES........................................................................................................126