Learning by Investing, Embodiment, and Speed of Convergence

TY - UNPB

T1 - Learning by Investing, Embodiment, and Speed of Convergence

AU - Groth, Christian

AU - Wendner, Ronald

N1 - JEL classification: D91, E21, O41

PY - 2011

Y1 - 2011

N2 - This paper sets up a dynamic general equilibrium model to study how the composition of technical progress affects the asymptotic speed of convergence. The following questions are addressed: Will endogenizing a fraction of the productivity increases as coming from learning by investing help to generate a low asymptotic speed of convergence in accordance with the empirical evidence? Does it matter whether learning originates in gross or net investment? The answers to both questions turn out to be: yes, a lot. The third question addressed is: Does the speed of convergence significantly depend on the degree to which learning by investing takes the embodied form rather than the disembodied form? The answer turns out to be: no. These results point to a speed of convergence on the small side of 2% per year and possibly tending to a lower level in the future due to the rising importance of investment-specific learning in the wake of the computer revolution as the empirical evidence suggests.

AB - This paper sets up a dynamic general equilibrium model to study how the composition of technical progress affects the asymptotic speed of convergence. The following questions are addressed: Will endogenizing a fraction of the productivity increases as coming from learning by investing help to generate a low asymptotic speed of convergence in accordance with the empirical evidence? Does it matter whether learning originates in gross or net investment? The answers to both questions turn out to be: yes, a lot. The third question addressed is: Does the speed of convergence significantly depend on the degree to which learning by investing takes the embodied form rather than the disembodied form? The answer turns out to be: no. These results point to a speed of convergence on the small side of 2% per year and possibly tending to a lower level in the future due to the rising importance of investment-specific learning in the wake of the computer revolution as the empirical evidence suggests.

KW - Faculty of Social Sciences

KW - transitional dynamics

KW - embodied technological progress

KW - decomposable dynamics

M3 - Working paper

BT - Learning by Investing, Embodiment, and Speed of Convergence

PB - Economic Policy Research Unit. Department of Economics, University of Copenhagen

ER -