2008 | 1-2 | 9-20
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Technology and adoption of technology have been important subjects of research in the literature of economic growth in recent years. Sources of technical progress might be domestic or/and international though there always exists believes amongst economic professionals that there is an important difference between developed and less developed countries, i.e. the first one innovates and exports technology while the second one imports and copies. But it is important to stress that these countries also need to care about their human capital which might be the key factor that determines whether a country, given their level of development, can take off or might fall into proverty trap.In their recent work, Bruno, Le Van and Masquin (2005) point out the conditions under which a less developed country can optimally decide to either concentrate their whole resources on physical capital accumulation or spend a portion of their national wealth to import technological capital. These conditions are related to the nation's stage of development which consists of level of wealth and endowment of human capital and thresholds at which the nation might switch to another stage of development. However, in their model, the role of education that contributes to accumulation of human capital and efficient use of technological capital is not fully explored. In this paper the authors extend their model by introducing an educational sector with which the developing country would invest in to train more skilled labor. They show that the country once reaches a critical value of wealth will have to consider the import of new technology. But when the level of wealth passes this value it is always optimal for the country to use new technology which requires high skilled workers. They show further that with possibility of investment in human capital and given 'good' conditions on the qualities of the new technology, production process, and/or the number of skilled workers there exists alternatives for the country either to purchase new technology and spend money in training high skilled labor or only purchase new technology but not to spend on formation of labor. Following this direction, the authors can determine the level of wealth at which the decision to invest in training and education has to be made. In the whole, the paper allows to determine the optimal share of the country's investment in physical capital, new technology capital and human capital formation in the long-run growth path. Two main results can be pointed out: (1) the richer a country is, the more money will be invested in new technology and training and education, (2) and more interestingly, the share of investment in human capital will increase with the wealth while the one for physical and new technology capitals will decrease. The paper is organized as follows. Section 2 presents the model and its dynamic properties with infinitely lived representative consumer. Section 3 presents empirical data from Poland, Hungary and Czech Republic which seem to confirm authors' theoretical results.
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  • Cuong Le Van, Paris School of Economics, Centre d' Economie de la Sorbonne, Universite Paris-1, CNRS 106-112 Bd de 1' Hópital, 75647 Paris Cedex 13, France
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