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The following should serve as a short summary of the main part of Grand Master Philippe Aghion's (Harvard) lively speech "Growth and Education: Gerschenkron meets Schumpeter" presented at the Annual Meeting of the Austrian Economic Association (NOeG). Since I have heard a couple of brilliant speeches during this two-day conference, I'll maybe post some additional stuff later on.

Well, Aghion proposed a model where the economic organization of countries that are technological leaders (innovators) and countries that are technolocial followers (immitators, adopters) differ systematically. In the model economy, equilibrium in technolocial leaders correspond to an innovation-based strategy, while technological followers pursue an investment-based strategy.

How does Gerschenkron fits into the picture? In his famous essay, Economic Backwardness in Historical perspective, he argued that backward economies, such as Germany, France and Russia during the nineteenth century, could rapidly catch up to more advanced economies by undertaking large investments and adopting frontier technologies. He emphasized that certain "non-competitive" arrangements, including long-term relationships between firms and banks, large firms and state intervention, facilitate such convergence (Consistent with this view, some economists, e.g. Stiglitz and Hausmann and Rodrik, call for greater government intervention in less developed countries where market failures tend to be more severe than in more andvanced economies. Countering this, several economists and political scientists emphasize the greater danger of government failures in less developed nations, where checks on governments are weaker (e.g. Shleifer and Vishny)).

On the other hand, economies close to the world technology frontier run an innovation based strategy with short-term relationships, younger firms, less investment and better selection of firms and managers. The selection of high-skill managers and firms is more important for innovation than for adoption.

In the model economy, firms engage both in copying and adopting technologies from the world frontier AND in innovation activities. A likely equilibrium sequence is for an economy to start with an investment-based strategy, relying on existing firms in order to maximize investment. Intuitively, this strategy corresponds to an equlibrium where selection is less important, insiders are protected, and savings are channeled through existing firms in an attempt to achieve rapid investment growth and technology adoption. As the economy approaches the world technology frontier, lack of selection becomes more costly, and there is typically a switch to an innovation-based strategy, where less successful firms and entrepreneurs are terminated.

Main findings:
There exists a level of development (distance to frontier) such that, if an economy does not switch out of the investment-based strategy before this treshold, it will be stuck in a non-convergence trap, where convergence to frontier stops. An implication of this discussion is a new theory of "leapfrogging".

Economies pursuing policies encouraging the investment-based strategy may initially grow faster than others, but then get suck. Examples: Brazil, Mexico and Peru grew relatively rapidly with import substitution and protectionist policies until the mid-1970s, stagnated and were taken over by other economies with relatively more competitive policies, such as Hong Kong or Singapore; for much of the post-war period both Korea and Japan achieved rapid growth and convergence relying on high investment, large conglomerates, government subsidies and relatively protected internal markets. Convergence and growth came to an end in the mid-1980s in Japan and during the Asian crisis in Korea).

A reason why some countries get stuck is that governments do not switch to policies supporting innovation and selection as the country approaches the frontier. Both the Korean and the Japanese cases illustrate the political economy problems created by the investment-based strategy. The close links between government officials and the chaebol in the Korean case and the bureaucrats and the keiretsu in the Japanese case appear to have turned into major obstacles to progress (The patriarchs of Samsung, Daewoo and Jinro, the three major chaebol, were convicted in the late 1990s of major bribing of two former presidents. Significantly, their jail sentences were pardoned in 1997).

Actually I do not recommend taking a look at Distance to Frontier, Selection, and Economic Growth (Daron Acemoglu, Philippe Aghion and Fabrizio Zilibotti) since you will inevitably notice that I have actually done a poor job in summarizing the first eight pages. If you can't refrain from downloading the paper, please start at page nine where the modelling stuff starts ;-D. The equations given below are those which are definitely worth memorizing:
At(ν) is productivity of an economy in intermediate sector ν at time t, st(ν) denotes the size of the project. Ãt denotes the world technology frontier, γ stands for the skill of the entrepreneur and At-1 is the average technology in the economy at time t-1. That's the way the two dimensions of productivity growth, adoption and innovation, enter the model. By adopting existing technologies, firms benefit from the state of world technology in the previous period Ãt-1, irrespective of the skill of the entrepreneur. In addition, there is productivity growth due to innovation building on the body of local knowledge, At-1.

Another representation:
As you can see there is a continuum of intermediate goods (produced in intermediate sector ν). This equation shows the importance of distance to frontier, as captured by the term Ãt-1/At-1. When this term is large, the country is far from the world technology frontier, and the major source of growth is the adoption of already well-established technologies. When this term becomes close to 1, so that the country is close to the frontier, innovation matters relativley more, and growth is driven by the γ term. Consequently, as the country develops and approaches the world technology frontier, innovation and entrepreneurial selection become more important.
Read the paper! It explains probably 80% of the variation in nonsense going on in the EU at the moment ;-D.