Embodied Learning by Investing and Speed of Convergence

59 Pages Posted: 21 Feb 2011 Last revised: 17 Oct 2012

See all articles by Christian Groth

Christian Groth

Department of Economics

Ronald Wendner

University of Graz - Department of Economics

Date Written: October 15, 2012

Abstract

Based on a dynamic general equilibrium model we study how the composition of technical progress, along three dimensions, affects transitional dynamics, with an emphasis on the speed of convergence. The three dimensions are, first, the degree to which technical change is embodied, second, the extent to which an endogenous source, learning, drives productivity advances, and, third, the extent to which the vehicle of learning is gross investment rather than net investment. The analysis shows that the speed of convergence, both ultimately and in a finite distance from the steady state, depends strongly and negatively on the importance of learning in the growth engine and on gross investment being the vehicle of learning rather than net investment. In contrast to a presumption implied by "old growth theory", a rising degree of embodiment in the wake of the computer revolution is textit{not} likely to raise the speed of convergence when learning by investing is the driving force of productivity increases.

Keywords: Transitional dynamics, speed of convergence, learning by investing, embodied technological progress, decomposable dynamics

JEL Classification: D91, E21, O41

Suggested Citation

Groth, Christian and Wendner, Ronald, Embodied Learning by Investing and Speed of Convergence (October 15, 2012). Available at SSRN: https://ssrn.com/abstract=1765204 or http://dx.doi.org/10.2139/ssrn.1765204

Christian Groth

Department of Economics ( email )

Oester Farimagsgade 5, Building 26
DK-1353 Copenhagen N.
Denmark

Ronald Wendner (Contact Author)

University of Graz - Department of Economics ( email )

Universitaetsstrasse 15
RESOWI - F4
Graz, A-8010
Austria
+43 316 380 3458 (Phone)
+43 316 380 693458 (Fax)

HOME PAGE: http://homepage.uni-graz.at/de/ronald.wendner/

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