Northern America's production of technology capital is transforming the world economy

Edward Prescott

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


Technology capital produced by multinationals, many of which are American, is playing a major role in transforming the world economy. This form of capital is special because it can be used in multiple locations not only within a country but also in locations in other countries by their wholly owned foreign subsidiaries. The extension of aggregate economic theory to include this form of capital justifies Adam Smith that the extent of specialization is limited by the size of the market. Further, the invisible hand works, and there are no monopoly rents. The extended theory accounts for an important part of the large gains from being open to foreign direct investment (FDI). It accounts for much of the higher reported returns on U.S. FDI than on foreigners' FDI in the U.S.

Original languageEnglish (US)
Pages (from-to)127-132
Number of pages6
JournalBusiness Economics
Issue number3
StatePublished - Dec 1 2016
Externally publishedYes


  • Development
  • Foreign Direct Investment
  • Invisible Hand
  • Multinationals
  • Technology Capital

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics


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