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Licensed Unlicensed Requires Authentication Published by De Gruyter February 1, 2005

Technology Adoption in Follower Countries: With or Without Local R&D Activities?

  • Yasuyuki Todo
From the journal Topics in Macroeconomics

Abstract

Technology adoption in follower countries can be accomplished by local R&D activities, but it can also be achieved without formal R&D, for example, by foreign direct investment. Empirical evidence suggests that current R&D activities often expand local knowledge for future R&D, while adoption without R&D does not seem to have this effect. We formalize this idea in a quality-ladder growth model and find that this biased externality results in multiple steady states: In the long run, countries with sufficient initial knowledge and human capital converge to a state in which R&D is locally undertaken and thus become relatively rich, while other countries fully rely on technology adoption without R&D and stay poor. Switching regression using cross-country data supports the presence of multiple steady states in R&D expenditures.

Published Online: 2005-02-01

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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