Unformatted text preview: isolated USSR (b) the best performance is awarded to Botswana Congo, Egypt, and Pakistan, (c) no useful technology transfer is recognized, (d) the beneficial role of export is denied. Reason why the approach of the growth of total factor productivity gets wrong: It is the neglect of the heterogeneous nature of capital, or a misspecification of the aggregate production function. At the country level, there are ‘fast-depreciating capital spending’ on machines, for example, and ‘slow-depreciating capital spending’ on infra-structure for harbor and roadwork. During the initial stage, both must be spent in large measure, while later, much less would be spent on average, over the maintenance for the second type. Similarly, at the industry level, the pioneering firm needs to spend on start up cost for launching an industry, and at the firm level, the case of Hyundai in sustaining sunk costs over years to develop the American market....
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- Fall '08
- Economics, aggregate production, generally useful tool, ‘fast-depreciating capital spending, ‘slow-depreciating capital spending