Working Paper: CEPR ID: DP8254
Authors: Gino A. Gancia; Andreas Müller; Fabrizio Zilibotti
Abstract: We construct and estimate a unified model combining three of the main sources of cross-country income disparities: differences in factor endowments, barriers to technology adoption and the inappropriateness of frontier technologies to local conditions. The key components are different types of workers, distortions to capital accumulation, directed technical change, costly adoption and spillovers from the world technology frontier. Despite its parsimonious parametrization, our empirical model provides a good fit of GDP data for up to 86 countries in 1970 and 122 countries in 2000. Removing barriers to technology adoption would increase the output per worker of the average non-OECD country relative to the US from 0.19 to 0.61, while increasing skill premia in all countries. Removing barriers to trade in goods amplifies income disparities, induces skill-biased technology adoption and increases skill premia in the majority of countries. These results are reverted if trade liberalization is coupled with international IPR protection.
Keywords: development accounting; directed technology adoption; distance to frontier; inappropriate technologies; productivity; skill-biased technical change; tfp differences
JEL Codes: F43; O11; O31; O33; O38; O41; O43; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| removing barriers to technology adoption (O33) | increased output per worker of the average non-OECD country (O57) |
| removing barriers to trade in goods (F13) | exacerbates income disparities (I24) |
| removing barriers to trade in goods (F13) | induces skill-biased technology adoption (J24) |
| inducing skill-biased technology adoption (J24) | increases skill premiums across most countries (J24) |