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Openness, Technology Capital, and Development

Edward Prescott and Ellen McGrattan

No 111, 2008 Meeting Papers from Society for Economic Dynamics

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

Date: 2008
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Related works:
Journal Article: Openness, technology capital, and development (2009) Downloads
Working Paper: Openness, technology capital, and development (2008) Downloads
Working Paper: Openness, technology capital, and development (2007) Downloads
Working Paper: Openness, Technology Capital, and Development (2007) Downloads
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