How to Reap the Induced Technological Bonus? A Mechanism and Illustrative Implementation

Abstract

Exogenous technical progress can have uneven impacts on productivity contingent on absorptive capacity, structural congruence and trade intensity. The paper illustrates the role of enabling behind-the-border factors for effective absorption and is pertinent for discussing issues like ‘Europe 2020’or Lisbon strategy for inclusive growth. Drawing on our model, we illustrate that the capture-parameter is the propellant force for effective assimilation of foreign technology of recent vintage. The capture parameter is the outcome of endogenous decision-making process. The ‘productivity bonus’ mechanism leaves room for changing the results via skill-mix composition. However, it awaits implementation in a large-scale economy-wide modeling framework for further extension.