Hostname: page-component-848d4c4894-2pzkn Total loading time: 0 Render date: 2024-05-24T14:04:48.683Z Has data issue: false hasContentIssue false
  • English
  • Français

TECHNOLOGICAL ABSORPTIVE CAPACITY AND DEVELOPMENT STAGE: DISENTANGLING BARRIERS TO RICHES

Published online by Cambridge University Press:  10 February 2020

J. Rodrigo Fuentes  and
Verónica Mies
J. Rodrigo Fuentes*
Affiliation:
Instituto de Economía, Pontificia Universidad Católica de Chile
Verónica Mies*
Affiliation:
Instituto de Economía, Pontificia Universidad Católica de Chile
*
Address correspondence to: J. Rodrigo Fuentes, e-mail: rodrigo.fuentes@uc.cl / Verónica Mies, e-mail: vmies@uc.cl. Address: Instituto de Economía, Pontificia Universidad Católica de Chile, Av. Vicuna Mackena 4860, Macul, Santiago, Chile.
Address correspondence to: J. Rodrigo Fuentes, e-mail: rodrigo.fuentes@uc.cl / Verónica Mies, e-mail: vmies@uc.cl. Address: Instituto de Economía, Pontificia Universidad Católica de Chile, Av. Vicuna Mackena 4860, Macul, Santiago, Chile.
Get access Rights & Permissions [Opens in a new window]

Abstract

Adoption of better technologies is a crucial way for developing countries to close productivity gaps with leading economies. However, the possibility of growing through technological adoption depends decisively on the country’s absorptive capacity. We build a theoretical model of technology adoption that focuses on four factors that shape the countries’ technological absorptive capacity, namely: (i) years of education; (ii) quality of the educational system; (iii) barriers that impede the entry and exit of firms; and (iv) the institutions that enhance or impede the diffusion of new technologies. We calibrate the model for a sample of 86 economies. The USA is our benchmark leading economy. We disentangle the relative weight of each development factor in explaining per capita income differences and study patterns in relationships between the type of development barrier and the level of development. Our results show that in relative terms, years of education and education system quality along with high barriers to opening new firms are the main impediments that middle- to high-income economies face in closing the gap with the USA. Education as a whole (quality plus years of education) explains 50% of the gap between high-income countries (HICs) and the USA, while the entry costs account for nearly 25% of this gap. A remarkable result is the small effect that individual reforms have on steady-state productivity in low-income countries (LICs). Outside of institutional framework, the remaining three factors are individually responsible for less than 15% of the gap. This result is explained by poor global absorptive capacity that reduces the effect of each factor when implemented individually. In fact, there are significant nonlinearities between development level and the effects of individual reforms, which are due to the strong complementarities between the different development factors.

Keywords

TFPTechnological AdoptionDevelopmentIncome GapsBarriersHuman Capital
Type
Articles
Information
Macroeconomic Dynamics , Volume 25 , Issue 6 , September 2021 , pp. 1589 - 1624
Copyright
© Cambridge University Press 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This work was supported by the National Fund for Science and Technology of Chile Fondecyt, [grant number 1150433]. We would like to thank participants at the North American Summer Meeting of the Econometric Society, EEA and LACEA meetings, Anderson School of Management at UCLA, Pontificia Universidad Católica de Chile and the Universidad de Chile seminars. We also thank the thoughtful comments of the editor and two anonymous referees. The usual disclaimer applies.

References

REFERENCES

Acemoglu, D. (2009) Introduction to Modern Economic Growth. Princeton, NJ: Princeton University Press.Google Scholar
Acemoglu, D. and Zilibotti, F. (2001) Productivity differences. Quarterly Journal of Economics 116, 563–606.CrossRefGoogle Scholar
Aghion, P. and Howitt, P. (1998) Endogeneous Growth Theory. Cambridge, MA: MIT Press.Google Scholar
Banerjee, A. and Duflo, E. (2005). Growth theory through the lens of development economics. In: Aghion, P. and Durlauf, S. N. (eds.), Handbook of Development Economics, pp. 473–552. Amsterdam, The Netherlands: Elsevier B.V.Google Scholar
Bartelsman, E., Haltiwanger, J. and Scarpetta, S. (2012) Cross-Country Differences in Productivity: The Role of Selection and Selection. NBER Working Paper: No. 15490.Google Scholar
Barro, R. and Lee, J.-W. (2010) A New Data Set of Educational Attainment in the World, 1950-2010. NBER Working Paper: No. 15902.CrossRefGoogle Scholar
Barro, R. J. and Sala-i-Martin, X. (1995). Economic Growth. New York: McGraw-Hill.Google Scholar
Bartel, A. P. and Lichtenberg, F. R. (1987) The comparative advantage of educated workers in implementing new technology: Some empirical evidence. Review of Economics and Statistics 69(1), 1–11.10.2307/1937894CrossRefGoogle Scholar
Basu, S. and Fernald, J. (1997) Returns to scale in U.S. production: estimates and implications. Journal of Political Economy 105(2), 249–283.CrossRefGoogle Scholar
Benhabib, J. and Spiegel, M. M. (1994) The role of human capital in economic development: evidence from aggregate cross-country data. Journal of Monetary Economics 34, 143–173.CrossRefGoogle Scholar
Benhabib, J. and Spiegel, M. (2002) Human capital and technology diffusion. In: Proceedings, Federal Reserve Bank of San Francisco. FRB of San Francisco Working Paper No. 2003-02.CrossRefGoogle Scholar
Bento, P. and Restuccia, D. (2017) Misallocation, establishment size, and productivity. American Economic Journal: Macroeconomics 9(3), 267–303.Google Scholar
Bergoeing, R., Loayza, N. and Piguillem, F. (2015) The Whole is Greater than the Sum of Its Parts: Complementary Reforms to Address Microeconomic Distortions. World Bank Economic Review (forthcoming).Google Scholar
Caselli, F. (2005) Accounting for cross-country income differences. In: Aghion, P. and Durlauf, S. N. (eds.), Handbook of Economic Growth, pp. 473–552. Amsterdam, The Netherlands: Elsevier B.V.Google Scholar
Caselli, F. and Coleman, W. J. II (2006) The world technology frontier. The American Economic Review 96(3), 499–522 CrossRefGoogle Scholar
Chang, R., Kaltani, L. and Loayza, N. V. (2009) Openness can be good for growth: The role of policy complementarities. Journal of Development Economics 90(1), 33–49 CrossRefGoogle Scholar
Comin, D. and Hobijn, B. (2004) Cross-country technology adoption: Making the theories face the facts. Journal of Monetary Economics 51, 39–83.CrossRefGoogle Scholar
Comin, D. and Mestieri, M. (2018) If technology has arrived everywhere, why has income diverged? American Economic Journal: Macroeconomis 10(3), 137–178.Google Scholar
Dakhli, M. and De Clercq, D. (2004) Human capital, social capital, and innovation: A multi-country study. Entrepreneurship & Regional Development 16(2), 107–128.CrossRefGoogle Scholar
De Ferranti, D., Perry, G. E., Guillermo, I. Gill, Guasch, J. L., Maloney, W. F., Sanchez-Paramo, C. and Schady, N. (2003) Closing the Gap in Education and Technology . World Bank Latin American and Caribbean studies. Washington DC: World Bank.Google Scholar
Duarte, M. and Restuccia, D. (2010). The role of structural transformation in aggregate productivity. The Quarterly Journal of Economics 125(1), 129–173.CrossRefGoogle Scholar
Feenstra, R. C., Inklaar, R. and Timmer, M. P. (2015) The next generation of the Penn World Table. American Economic Review 105(10), 3150–3182. www.ggdc.net/pwt.CrossRefGoogle Scholar
Hall, R. E. (1990) Invariance properties of Solow’s productivity residual. In: Diamond, P. (ed.), Growth, Productivity, Employment. Cambridge, MA: MIT Press.Google Scholar
Hall, R. E. and Jones, C. I. (1999) Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics 114, 83–116.CrossRefGoogle Scholar
Herrendorf, B., Rogerson, R. and Valentinyi, A. (2013) Growth and Structural Transformation. NBER working paper: No. 18996.CrossRefGoogle Scholar
Howitt, P. (2000) Endogenous growth and cross-country income differences. American Economic Review 90, 829–846.CrossRefGoogle Scholar
Hsieh, C.-T. and Klenow, P. J. (2009) Misallocation and manufacturing TFP in China and India. Quarterly Journal of Economics 124, 1403–1448.CrossRefGoogle Scholar
Klenow, P. J. and Rodriguez-Clare, A. (1997) The neoclassical revival in growth economics: Has it gone too far? In: Bernanke, B. and Rotemberg, J. (eds.), NBER Macroeconomics Annual 1997, pp. 73–103. Cambridge, MA: MIT Press.Google Scholar
Lagos, R. (2006) A Model of TFP. Review of Economic Studies 73 (4): 983–1007.CrossRefGoogle Scholar
Mehra, R. (2003) The equity premium: Why is it a puzzle? Financial Analysts Journal 59(1), 54–69. January/February 2003 Posted: 29 April 2003.CrossRefGoogle Scholar
Midrigan, V. and Xu, D. Y. (2014) Finance and misallocation: Evidence from plant-level data. American Economic Review 104(2), 422–458.CrossRefGoogle Scholar
Nelson, R. and Phelps, E. S. (1966) Investment in humans, technological diffusion, and economic growth. American Economic Review 56(1/2), 69–75.Google Scholar
Norrbin, S. (1993) The relationship between price and marginal cost in U.S. industry: a contradiction. Journal of Political Economy 101, 1149–1164.CrossRefGoogle Scholar
Okoye, D. (2016) Appropriate technology and income differences. International Economic Review 57(3), 955–996.CrossRefGoogle Scholar
Parente, S. and Prescott, E. C. (1994) Barriers to technology adoption and development. Journal of Political Economy 102(2), 298–321.10.1086/261933CrossRefGoogle Scholar
Parente, S. and Prescott, E. C. (1999) Monopoly rights: A barrier to riches. American Economic Review 89, 1216–1233.CrossRefGoogle Scholar
Parente, S. and Prescott, E. C. (2002) Barriers to Riches. Cambridge, MA: MIT Press.Google Scholar
Park, W. G. (2002) Institutions and Incentives for R&D Implications for LAC Economies. Background paper for the LAC flagship report, World Bank, Washington D.C.Google Scholar
Restuccia, D. and Rogerson, R. (2008) Policy distortions and aggregate productivity with heterogeneous plants. Review of Economic Dynamics 11(4), 707–720.CrossRefGoogle Scholar
Restuccia, D., Yang, D. T. and Zhu, X. (2008) Agriculture and aggregate productivity: A quantitative cross-country analysis. Journal of Monetary Economics 55(2), 234–250.CrossRefGoogle Scholar
Schoellman, T. (2012) Education quality and development accounting. Review of Economic Studies 79(1), 388–417.CrossRefGoogle Scholar