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The Role Of Expectations In A Specialization-Driven Growth Model With Endogenous Technology Choice

Author

Listed:
  • SHIRO KUWAHARA

    (Institute of Economic Research, Kyoto University, Yoshida-honmachi, Sakyo-ku, Kyoto 606-8501, Japan)

  • AKIHISA SHIBATA

    (Institute of Economic Research, Kyoto University, Yoshida-honmachi, Sakyo-ku, Kyoto 606-8501, Japan)

Abstract
Extending the Kim (1989) model of endogenous labor specialization to an overlapping generations model with an endogenous technology choice, we show in this paper that, when the market size and the fixed costs associated with the technologies with labor specialization are small, the growth pattern of this economy depends on worker expectations. In other words, if workers expect low returns of specific human capital, they will not invest in such capital, and the economy will be eventually locked in an underdevelopment trap. On the other hand, if they expect high returns of specific human capital, they invest in such capital, and, as a result, the economy can exhibit long-run growth.

Suggested Citation

  • Shiro Kuwahara & Akihisa Shibata, 2006. "The Role Of Expectations In A Specialization-Driven Growth Model With Endogenous Technology Choice," Division of Labor & Transaction Costs (DLTC), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 55-69.
    • Handle: RePEc:wsi:dltcxx:v:02:y:2006:i:01:n:s0219871106000287
    DOI: 10.1142/S0219871106000287
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    More about this item

    Keywords

    Labor specialization; endogenous choice of technology; endogenous growth; development traps;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D - Microeconomics
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F - International Economics
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L - Industrial Organization
    • O - Economic Development, Innovation, Technological Change, and Growth

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