Economic Growth Of Developing Countries In The Open Economy

The new trade theory can neither give us a reasonable interpretation on economic growth of developing countries with some conceptions alone such as monopolistic competition, economies of scale, increasing returns to scale, and so on, nor explain why industries in developing countries could not improve their competitiveness, although they were protected against international competition to enjoy economies of scale. Because endogenous technological change theory just considers international diffusion of technologies without exploring the mechanism of technology diffusion, it cannot interpret why developing countries cannot enjoy economic growth with new technology introduced from Developed Countries. Because of ignoring the effect of human capital, the new trade theory and endogenous technological change theory failed to analyze the issue of economic growth of Developing Countries in the open economy. Although Human Capital theory in the new growth theory considers economic growth in a closed economy, it has not explored economic growth in an open economy yet. It is necessary to study economic growth of developing countries in the open economy from the perspective of human capital, which is the issue of this dissertation.Human Capital is very important to economic growth of Developing Countries. On one hand Human Capital can serve as an input in economic activities, more human capital stock means Developing Countries can specialize in the production of Human Capital-intensive products in the international trade, on the other hand Human Capital has its unique externality. Human Capital accumulation can enhance the skill level of a typical worker, lower production cost, and improve productivities of Developing Countries' R&D sector, which determine Developing Countries' competitiveness. Indeed, Human Capital is the fundamental element to economic growth of Developing Countries.This dissertation elaborates to integrate the new trade theory and the new growth theory into a general framework to study economic growth of Developing Countries in the open economy. The dissertation regards human capital as the core of economic growth in the long run, and analyzes its role in the mechanism of technology diffusion, in North-South trade pattern, in international specializations, in the improvement of industrial structure in Developing Countries, and so on in details.The dissertation has six chapters. Chapter 1 gives a brief literature review on the issue of economic growth in the open economy from three aspects. We survey briefly the related literature in the trade theory, especially in the new trade theory, the classical literature of endogenous growth theory (especially endogenous technological changetheory), and Human Capital theory, respectively.Chapter 2 investigates economic growth of Developing Countries with international technology diffusion in an endogenous growth model. In the model, whether an advanced technology developed by Developed Countries is appropriate to Developing Countries is determined by the Developing Countries' capability to adopt and absorb the new technology, which depends on per capita human capital in Developing Countries. That is, the technology introduced to Developing Countries must match with the human capital level in Developing Countries. It is suggested that improving human capital level per capita and increasing human capital saving rate should be a feasible development strategy available to Developing Countries' governments.Although Chapter 2 argues matching between the introduced technology and the human capital level in Developing Countries is very important to economic growth of Developing, Chapter 2 analyze neither the mechanism of technology diffusion, nor the role of Human Capital in the mechanism. It is commonly said that trade, technology imitation and foreign direct investment (FDI) are the most import specific channels of technology diffusion. In Chapter 3 and Chapter 4, we analyze the most two technology diffusion channels, FDI and technology imitation, respectively.In Chapter 3, we analyze FDI and economic growth in Developing Countries. Chapter 3 explores two relative issues, the determinants of industrial transfer from the North to the South in FDI and how FDI affects economic growth in the South, in a two-country endogenous growth model. The competition from the host country forces Multinationals to transfer more advanced technology or newer industries to the host country and whether FDI contributes to economic growth depends on the speed of human capital accumulation in the host country. It is suggested that popularizing and improving education to increase human capital accumulation should be a feasible development strategy available to Developing Countries' governments.Chapter 4 develops an extended model based on Grossman and Helpman's (1991c) celebrated insight. Because of the technological differences across industries, the behaviors of innovations in developed countries and imitations in Developing Countries show different patterns across these industries. When technological differences introduced, we find that the prevalence of Product Cycle in North-South trade varies across industries spectrum, is maximized in medium-tech industries, and does not exit in both low-tech industries and hi-tech industries. That is Grossman and Helpman's (1991c) Product Cycle in is a special case of ours. In the long run, the imitation ability in Developing Countries is determined by the Human Capital level. And because ofleaming-by doing effect and Human Capital accumulation, North-South trade pattern can evolve over time, which can be affected by policies in Developing Countries too.The analysis in Chapter 3 and Chapter 4 shows that the effect of international technology diffusion, whether by FDI or imitation, on economic growth of Developing Countries is determined by the Human Capital level in Developing Countries. In Chapter 5, we advance the analysis of the role of Human Capital into the discussion on dynamic comparative advantage. Human Capital accumulation can enhance productivities of the common worker, lower production cost, and improve efficiency in R&D sector. That is Human Capital is the core of dynamic comparative advantage in the long run.Chapter 6 summarizes the major findings, discusses some policy implications, especially discusses the case of China, and suggests some directions for future research.Under the guidance of the Advisor, the author of the dissertation has comprehensively studied the trade theory and the growth theory more than 3 years. During these years, we tried to analyze the mechanism between trade and growth, worked hard to explore economic growth of Developing Countries in the open economy. Indeed, we have done some marginal contributions on the issue of economic growth of Developing Countries in the open economy, some of which have been published in national outstanding academic periodicals, some of which have been accepted by these periodicals, and some of which have been read publicly in national academic conferences. It is seem that our work has been acknowledged by the national academic circle. This paper, as my Ph.D dissertation, is based on these.