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Technology Adoption, Industrial Structure and Growth in Emerging Economies
Keywords
technology adoption, heterogeneous agents, monopolistic competition, efficiency threshold, entry-exit dynamics
Abstract
This paper explores the link which is often neglected in the literature between the industrial structure and the aggregate economic growth in emerging economies (EE) that are implementing an openness trade policy. Based on the Schumpeterian technological paradigm concept, we show the relevance of the technology adoption hypothesis rather than the innovation hypothesis in an EE’s context. We develop an endogenous deterministic growth model for small open economies in which domestic agents adopt technology incorporated in equipment import. Through the model, we prove that equipment import, technological externalities, and the fall in relative prices are the sources of openness growth effects. In this paper we determine endogenously the minimal efficiency threshold of entry and exit dynamics in the domestic industrial structure within an endogenous growth framework. We show that the consumption goods diversity improves the growth rate of consumption and welfare by its negative action on the surviving firms monopoly power. We argue that for intermediate goods, the agents heterogeneity is negatively correlated with stationary state growth rate. From an economic policy point of view, it would be recommended to intervene by improving the performance of the domestic firms before implementing the trade openness policy, and after its implementation by controlling the markets to avoid the monopolistic structure that is negatively correlated with economic growth at the aggregate level.