Working Paper: CEPR ID: DP13799
Authors: Thomas Sampson
Abstract: This paper studies the origins and consequences of international technology gaps. I develop an endogenous growth model where R&D efficiency varies across countries and productivity differences emerge from firm-level technology investments. The theory characterizes how innovation and learning determine technology gaps, trade and global income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries where the advantage of backwardness is lower and knowledge spillovers are more localized. I estimate R&D efficiency by country and innovation-dependence by industry from R&D and bilateral trade data. Calibrating the model implies technology gaps, due to cross-country differences in R&D efficiency, account for around one-quarter to one-third of nominal wage variation within the OECD.
Keywords: technology gaps; trade; technology investment; Ricardian comparative advantage; international wage inequality
JEL Codes: F11; F43; O14; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| R&D efficiency (O32) | income levels (J31) |
| R&D efficiency (O32) | productivity (O49) |
| technology gaps (O33) | wage disparities (J31) |
| R&D efficiency (O32) | localization of knowledge spillovers (O36) |
| localization of knowledge spillovers (O36) | income levels (J31) |
| technology gaps (O33) | R&D efficiency (O32) |