Discussion on the Idea and Technology in Labor Augmenting Solow Model Besides Physical and Human Capital Complementarity

Abstract

It is suggested that developing countries could catch up with the developed world if only they attained increased levels of human development.

The links between growth and human development are complex even with human capital its self and human capital to the physical capital. Besides large disparities in indicators of human well-being, such as life expectancy and educational attainment, not all countries with relatively higher levels of human development handles to achieve high long-term economic growth rates (United Nations, 2006). As data points out that in order to reach the convergence among the countries, not only the physical to human capital ratio plays crucial role but also the income level specific effects. What these income level specific effects indicate in our study? How they are related with technology and ideas?

Technologies are the way in which inputs to the production process are transformed into output and ideas improve the technology of production. Therefore, a new idea allows a given bundle of inputs to produce more or better output and ideas are non-rivalrous. Once an idea is created, anyone with knowledge of the idea can take advantage of it. Ideas are partially excludable while technologies in the inputs are mostly excludable since goods and inputs suffer from tragedy of commons. Thus, in order to benefit efficiently from the ideas and technology, the macro economic stability, social cohesion, common structural habits or feeling secure about the life, geography, religion, corruption, quality of institutions and governance structures matter for economic growth. That is what dummies stands for and that goes with what Bulutay (1995) emphasizes about the ambiance created by the countries.

Keywords: Solow Model, Technology, Labor Augmenting, Physical Capital, Human Capital, Complementarity