Investment for Technology Progress, Increasing Marginal Products and Bistable State of Economic Growth

Abstract

For an open developing economy, besides the effect of R&D, an important way of technology progress is to get the advanced technology by certain investment. But only when the investment reaches a certain amount, can the level of technology be raised obviously. So there is a large set up cost in the importation of technology and equipment. A S-curve is used in the model to describe this nonlinear property. By the static equilibrium and dynamic analysis, the following results are obtained:

• 1. Such a small open developing economy (SODE) is locked in the initial state which is in the lower level of technolgy. Only when the disturbance (investment for technology import) exceeds a critical value could it lead to the take—off of SODE.

• 2. In the period of economic take off, the economic growth can reach a high speed in a short time interval.

• 3. This high growth rate is caused by the effect of self-reinforcing mechanism arising from the increasing marginal products ( IMP ) of capital.

IMP is a important cause of nonlinear interaction in economic system. On the basis of neoclassical economic growth theory, it has been proved by singularity theory that when there is IMP in the economy, there will be bistable state of economic growth. Exceeding a certain economic barrier is the basic condition of economic take — off. The influence of capital accumulation and population growth on the economic development is discussed.