Innovation, nature of investment and divergent growth paths: an explanatory model

David Flacher (), Jean-Hervé Lorenzi and Alain Villemeur
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David Flacher: CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - UP13 - Université Paris 13 - CNRS - Centre National de la Recherche Scientifique

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Abstract: The principle of conditional convergence, in growth theory, fails to explain growth paths that are durably divergent among countries having similar structural characteristics (same rates of investment, of capitaldepreciation, of demographic growth, and similar access to technologies and resources...). Our research models the reasons of these divergencesby making the assumption that the nature of technical progress is not the same one according to the type of investment that is realized. We first deduce from this assumption relations between investment, production and employment. Then, by introducing the optimizing behavior of the firms, we show the existence of two balanced and durable growth regimes. The "fast growth regime" is characterized by the importancegiven to the capacity investments (and thus to product innovation). The "slow growth regime" is characterized by the importance given to process investments. The nature of investments thus constitutes a crucial conditition of convergence of the economies.

Keywords: Growth; consumption; investment; growth paths; Croissance; consommation; investissement; régimes de croissance (search for similar items in EconPapers)
Date: 2005
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