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A Model Of Technology Transfer In Japan's Rapid Economic Growth Period

Date Added: Mar 2011
Format: PDF

Why did the Japanese economy stagnate before World War II, how did it achieve rapid economic growth after the war, and why did it stagnate again after the 1970s? To answer these questions, the author developed a two-country trade model with technology transfer, where firms in the two countries compete in a Bertrand fashion, where firms in a developed country (the U.S.) transfer technology to firms in a developing country (Japan) if it is profitable to do so, and where the technology transfer is the engine of economic growth. In this model, among multiple equilibria, the equilibrium with low labor cost in Japan was chosen during the rapid growth period.