When Does A Developing Country Use New Technologies?
The authors develop a model of optimal pattern of economic development that is first rooted in physical capital accumulation and then in technical progress. They study an economy where capital accumulation and innovative activity take place within a two sector model. The first sector produces a consumption good using physical capital and non skilled labor. Technological progress in the consumption sector is driven by the research activity that takes place in the second sector. Research activity which produces new technologies requires technological capital and skilled labor. New technologies induce an endogenous increase of the Total Factor Productivity of the consumption sector.