ABSTRACT
Although technological development is widely recognized as a function of human ingenuity and innovation and seen by many development scientists as an important means for achieving economic development, its actual use as a policy lever remains largely underutilized, since the process of its implementation is unclear. This paper attempts to identify operational instruments for supporting technological development so it can be incorporated easily into the development plans. A system dynamics model of a dual economic system incorporating also the behavioral responses of the economic actors to competition and their ability to innovate is developed. This model is used as an experimental apparatus to search for appropriate technological development policies to support economic growth and change income distribution. Policies to promote competition among the monopolistic formal firms while simultaneously providing positive assistance to the competitive informal firms appear to offer promising alternatives to the traditional fiscal policy levers mainly affecting prices and factor costs.
