Identifier

etd-07272009-144116

Degree

Doctor of Philosophy (PhD)

Department

Economics

Document Type

Dissertation

Abstract

This research focuses on the role of human capital in explaining cross-country productivity differences, and in shaping the world allocation of capital stocks. A widely held view is that a country's ability to absorb and implement technologies is tied to its human capital. We construct a novel specification of technology that incorporates this idea. Countries are comprised of a range of industries with heterogeneous productivities. In high human capital countries, productivity is maximized for industries with the most sophisticated technologies, while in low human capital countries, productivity is maximized for industries with less sophisticated technologies. A key result is that both aggregate total factor productivity and the industrial structure of an economy are driven by inter-industry variations in productivity which in turn is a function of human capital. We embed this specification within a standard production function framework and undertake a development accounting exercise. Our results indicate that almost half of the variation in aggregate TFP differences can be explained by the distribution of inter-industry TFP. The second essay models the entry of foreign multinationals within the technology-skill complementarity framework. Foreign and domestic firms engage in a Bertrand competition over each industry. The equilibrium solution of the model yields the threshold industry starting from which foreign firms edge out domestic firms. Interest rates are endogenously determined within the model and this allows us to observe the extent to which the international capital markets are globalized. Our findings suggest that financial markets are characterized by imperfect capital mobility. Therefore we carry out a hypothetical experiment by analyzing the reallocation of the world capital stock under perfect capital mobility. The third essay evaluates the local conditions required for FDI to bring positive effects on growth and it consists of a unified study of absorptive capacities. We analyze the simultaneous interactions of FDI with other growth determinants and their effect on the contribution of FDI on the growth rate of GDP per capita. Our findings suggest that FDI can have significant contribution to economic growth, but its presence in developing countries must complement rather than substitute a set of other growth determinants.

Date

2009

Document Availability at the Time of Submission

Release the entire work immediately for access worldwide.

Committee Chair

Chanda ,Areendam

Included in

Economics Commons

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