Openness, technology capital, and development

Ellen R. McGrattan, Edward Prescott

Research output: Contribution to journalArticle

50 Scopus citations

Abstract

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. Technology capital is distinguished from other forms of capital in that a firm can use it simultaneously in multiple domestic and foreign locations. A country can exploit foreign technology capital by permitting direct investment by foreign multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.

Original languageEnglish (US)
Pages (from-to)2454-2476
Number of pages23
JournalJournal of Economic Theory
Volume144
Issue number6
DOIs
StatePublished - Nov 1 2009

Keywords

  • Foreign direct investment
  • Openness

ASJC Scopus subject areas

  • Economics and Econometrics

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