Learning-by-Doing and Its Implications for Economic Growth and International Trade

By adding physical capital as a factor of production, and by introducing capital accumulation and population growth, I generalized the model of learning-by-doing proposed by Young (1991). Under this extended model, I studied the evolution of human capital formulated by learning-by-doing, its effects on long run growth and intertemporal welfare, the dynamic effects of trade between two countries with different initial stocks of knowledge, and the effects of saving rate and population growth rate of each country. In addition to confirming Young’s original conclusion that the country with less (more) initial stock of knowledge enjoys lower or the same (higher or the same) growth rates of technical progress and per capita GDP than those enjoyed under autarky, I have shown that the learning-by-doing progress is the source of long-run sustainable growth, both of which exhibit higher rates of growth with an increase in the country’s saving rate or population growth rate. In addition, the dynamic behaviors of both countries’ intertemporal welfare, as well as their relationships with both countries’ saving rates and population growth rates have also been discussed in detail.