DP229 Fixed Investment and the Technology Gap in the UK

Author(s): Michael Beenstock , Chris Whitbread

Publication Date: March 1988

Keyword(s): Aggregate Investment , Neo classical Investment , Technology , Trade Unions

JEL(s): 423 , 522 , 621

Programme Areas: Applied Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP229.asp

United Kingdom investment is explained in terms of the international diffusion of technology, where the United States is assumed to be a technological leader and the United Kingdom a technological laggard. The gap between United Kingdom and United States capital-labor ratios is decomposed into four components: an adjustment gap, an information gap, an appropriate technology gap and a resistance gap. The factors that might influence the gap are hypothesized and it is found that the model gives a reasonable account of business investment since 1960.