Journal Article

Socially optimal North–South capital transfer and technology diffusion


  • Lontzek
  • T.S.
  • Hübler
  • M.
Publication Date

We study North–South capital transfer and the diffusion of embodied technologies within a framework of intertemporal global welfare maximization. We show saddle path stability and characterize the steady state. We then examine the transition path by running numerical experiments based on realistic data. As a result, technology diffusion will succeed if the absorptive capacity is sufficient which requires sufficient investment. While a large share of capital is allocated to the South in early periods, this share declines in later periods when the South has caught up in terms of technologies.


JEL Classification
F21, O11, O33, O47

Key Words

  • absorptive capacity
  • capital mobility
  • Human Capital
  • Optimal control
  • Technology diffusion
  • Technology Transfer