Organizational development, foreign technology and economic growth: long-run equilibrium, transitional dynamics and closed-form solutions

Abstract

We study the dynamics of long run growth in a two sector economy with externalities where organizational development affects physical capital and foreign technology accumulation. The objective of this thesis is to show that the growth model introduced by Lucas which was further developed by Sala-IMartin and Mulligand, Santos and Caballe , Benhabib and Perli and eventually by Boucekkine and Ruiz-Tamarit, has two compelling properties. Firstly, if the share of physical capital is greater than the externality parameter of foreign technology, then there will be a unique transitional equilibrium path. Secondly, if the share of physical capital is less than the externality parameter in the production function of foreign technology, then the system will lead to multiple steady-states equilibrium i.e, several transitional paths. Furthermore, we derive the closed-form solutions where the elasticity of output with respect to physical capital is equal to the inverse of intertemporal elasticity of substitution, for all the variables in the model to derive the transitional conditions