Working Paper: NBER ID: w3733
Authors: Stephen L. Parente; Edward C. Prescott
Abstract: Technology change is modeled as the result of decisions of individuals and groups of individuals to adopt more advanced technologies. The structure is calibrated to the U.S. and postwar Japan growth experiences. Using this calibrated structure we explore how large the disparity in the effective tax rates on the returns to adopting technologies must be to account for the huge observed disparity in per capita income across countries. We find that this disparity is not implausibly large.
Keywords: Technology Adoption; Economic Growth; Institutional Arrangements
JEL Codes: O33; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Differences in institutional arrangements across countries (P16) | Variations in the expected returns on investments in new technologies (O33) |
| Variations in the expected returns on investments in new technologies (O33) | Technology adoption (O33) |
| Technology adoption (O33) | Economic growth (O00) |
| Institutional taxes (H29) | Diminished returns on investment (G31) |
| Diminished returns on investment (G31) | Discouraged technology adoption (O33) |
| Changes in institutional arrangements in Zimbabwe (O17) | Increased returns on agricultural investments (Q14) |
| Increased returns on agricultural investments (Q14) | Tripling of output among black peasant farmers (O55) |
| Changes in institutional arrangements in Japan (F33) | Facilitation of technology adoption (O33) |
| Facilitation of technology adoption (O33) | Economic growth in Japan (O49) |
| Removal of restrictive institutional arrangements in Japan (E69) | Catalyst for growth (O00) |