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The quantitative importance of openness in development

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  • The quantitative importance of openness in development
  • Cai, Wenbiao; Ravikumar, B.; G. Riezman, Raymond
  • Federal Reserve Bank of St. Louis


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Title The quantitative importance of openness in development
Similar Titles
Material Type Reports
Author(English)

Cai, Wenbiao; Ravikumar, B.; G. Riezman, Raymond

Publisher

St. Louis:Federal Reserve Bank of St. Louis

Date 2013-08
Series Title; No Working Paper / 2013-025B
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Industry and Technology < General
Holding Federal Reserve Bank of St. Louis

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)