Technology adoption and multiple growth paths: An intertemporal general equilibrium analysis of the catch-up process in Thailand

Abstract

As opposed to the Veblen—Gerschenkron catching-up hypothesis, the recent literature allows for technological divergence in backward economies. We extend a nonlinear adoption function to include openness and interact with capital accumulation in an intertemporal general equilibrium framework. The threshold gap necessary to catch up is endogenously determined by the economy's absorptive capacity. The model generates multiple transition growth paths depending on whether technological catch-up is achieved, and due to the endogeneity of the threshold gap, endogenous switching between development paths might be observed. Our simulations of the Thailand experience show how lack of investment in education and protectionism generate loss of transition growth and technological divergence. The paper highlights the role of absorptive capacity, and especially its importance for economies on the balance between low growth and high growth paths. JEL no. O41, O53