CATCHING UP AND SLOWING-DOWN - LEARNING AND GROWTH-PATTERNS IN AN OPEN-ECONOMY

This paper develops a model of an open economy in which the stock of h uman capital may be augmented by either imitation or innovation. Produ ctivity in imitation depends on the difference between the body of wor ld knowledge and an individual's stock of human capital (the knowledge gap), while productivity in innovation depends on past behavior throu gh learning-by-doing. The model predicts convergence of growth rates, hut no, (necessarily) of per capita income levels, in the steady state . An improvement in either investment technology in either country rai ses growth and income levels in both countries. A technological improv ement that raises productivity in imitation (innovation) in one countr y benefits it relatively more (less;than the rest cf the world. The dy namic path followed by a small country that moves from autarky to inte gration with the rest of the world Is characterized by an initial peri od of rapid imitation - for which there exists a large catch-up opport unity - followed. by it shift towards innovation as the knowledge gap is reduced and the economy's technical maturity rises. growing world e conomy, late developers experience higher growth rates than developers upon opening up.