Conclusion
This paper generalizes the Nelson-Phelps catch-up model of technology diffusion facilitated by levels of human capital. We allow for the possibility that the pattern of technology diffusion is exponential.
This specification predicts that nations will exhibit positive catch-up in growth rates. In contrast a logistic diffusion specification implies that a country with a sufficiently small capital stock may exhibit slower total factor productivity growth than the leader nationWe then derive a nonlinear specification for total factor productivity growth that nests these two specifications. We test this specification for a cross-section of 84 countries. Our results favor the logistic specification over the exponential, and other estimated parameters are consistent with our theoretical predictions. The catch-up term in our specification is robust to a number of sensitivity checks, including the use of average rather than initial levels of human capital and the inclusion of a variety of geo-political conditioning variables commonly used in the literature. This supports the notion that human capital plays a positive role in the determination of total factor productivity growth rates through its influence on the rate of catch-up. However, the direct performance of the human capital term on its own is somewhat less robust.Using the coefficient estimates from our parametric estimation, we then calculate the critical human capital stocks needed to achieve positive total factor productivity growth in 1960 and 1995. Our results identify 27 nations as falling below the critical human capital level in 1960, while only 4 nations remain below the critical human capital level in 1995.
The historic experiences of these nations support our theory well. 22 of the 27 nations predicted to have slower growth than the leader nation (the United States) actually did so over the subsequent 35 years.
This contrasts markedly with the overall experience of the nations in our sample, where 49 of the 84 nations experienced faster total factor productivity growth than the leader nation.References
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