The article Endogenous innovation in the
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Most models of development include human capital as the driving force behind economic success (Grossman & Helpman, 1994, p. 23). However, this is not simply based upon population size but human capital in terms of the citizens knowledge of technological development and collective ability to thrive in an increasingly interdependent and technically sophisticated global marketplace. Hence both authors recommendation to seek exposure to the new technology of more developed nations. Exposure to other nations generates immediate wealth in terms of the purchasing power of employees but also technological wealth as when individuals or firms accumulate new capital, they inadvertently contribute to the productivity of capital held by others. Such spillovers may occur in the course of investment in physical capital (Grossman & Helpman, 1994, p. 24). In short, foreign investment in a nation, even in the form of factories that generate exported goods using local, cheaper labor still has a positive effect upon the economy. Workers learn from their new jobs as well as earn more
A foreign company comes into a nation, but the workers increase in salary gives them greater buying power, relatively speaking than they had before. They buy more goods from local businesses, can afford
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