Paper #1125

Title:

Technological change and the wealth of nations

Authors:

Gino Gancia and Fabrizio Zilibotti

Date:

October 2008

Abstract:

We discuss a unified theory of directed technological change and technology adoption that can shed light on the causes of persistent productivity differences across countries. In our model, new technologies are designed in advanced countries and diffuse endogenously to less developed countries. Our framework is rich enough to highlight three broad reasons for productivity differences: inappropriate technologies, policy-induced barriers to technology adoption, and within-country misallocations across sectors due to policy distortions. We also discuss the effects of two aspects of globalization, trade in goods and migration, on the wealth of nations through their impact on the direction of technical progress. By doing so, we illustrate some of the equalizing and unequalizing forces of globalization.

Keywords:

Barriers to Technology Adoption, Directed Technology Adoption, Endogenous Growth, Globalization, Human Capital, Inappropriate Technologies, Market Power, Political Economy, Skill-biased Technical Chan

JEL codes:

F43, O11, O31, O33, O38, O41, O43, O47

Area of Research:

Macroeconomics and International Economics

Published in:

Annual Review of Economics, 1, 93-120, 2009

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