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The quantitative importance of openness in development

  • The quantitative importance of openness in development
  • Cai, Wenbiao; Ravikumar, B.; G. Riezman, Raymond
  • St. Louis : Federal Reserve Bank of St. Louis
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Title The quantitative importance of openness in development
Author Cai, Wenbiao; Ravikumar, B.; G. Riezman, Raymond
Publisher St. Louis : Federal Reserve Bank of St. Louis
Publication Date 2013 - 08
Material Type Report
Country South Korea Holding Federal Reserve Bank of St. Louis
Language English License
Series Title Working Paper

Abstract

This paper deals with a classic development question: how can the process of economic development – transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology – be accelerated? Lewis (1954) and Rostow (1956) argue that the pace of industrialization is limited by the rate of capital formation which in turn is limited by the savings rate of workers close to subsistence. We argue that access to capital goods in the world market can be quantitatively important in speeding up the transition. We develop a parsimonious open-economy model where traditional and modern technologies coexist (a dual economy in the sense of Lewis (1954)). (The rest omitted)

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