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A Theory Of Digital Divide: Who Gains And Loses From Technological Changes?

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  • Yong Jin Kim

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    (Division of Economics, College of Social Science, Ajou University)

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    Abstract

    This paper attempts to answer the question: How does the income gap between workers and capitalists evolve over time in the period of ITC and globalization increasing international technology creation and transfers? The model bases on a Romer¡¯s type of variety expansion of intermediate goods. We assume that there are two types of agents supplying two different types of factors. Workers supply specific skill weighted labor by accumulating their specific skills that depreciate with an introduction of new intermediate goods. The other type of agents, R&D agents, produce and sell new varieties of intermediate goods monopolistically after inventing them. The model yields: Depending on the elasticity of substitution between the two factors and on the value of the factor share, an increase in the efficiency of technology creation (or lowering the barriers on the imports of intermediate goods) affects the growth rates of workers¡¯ and R&D agents¡¯ average income differently. First, if the elasticity of substitution is greater than one, in a certain stage of development, an advance in ITC or ¡®globalization¡¯ increases the growth rate of R&D agents¡¯ average income, while it decreases that of workers¡¯. Thus, the ¡®Digital Divide¡¯ happens. Conversely, if the elasticity of substitution is less than one, the result will be reversed. These results are intuitively obvious. Second, if an economy develops from a higher factor share of the workers to a sufficiently lower one, the growth rates of GNP, and the average incomes of both workers and R&D agents increase over time.

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    File URL: http://www.jed.or.kr/full-text/28-1/Kim.PDF
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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 28 (2003)
    Issue (Month): 1 (June)
    Pages: 1-22

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    Handle: RePEc:jed:journl:v:28:y:2003:i:1:p:1-22

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    Related research

    Keywords: Romer¡¯s Model; R&D; Specific Skill; Digital Divide;

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    References

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    1. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    2. Daron Acemoglu, 2000. "Labor- and Capital- Augmenting Technical Change," NBER Working Papers 7544, National Bureau of Economic Research, Inc.
    3. Elhanan Helpman & Antonio Rangel, 1998. "Adjusting to a New Technology: Experience and Training," Harvard Institute of Economic Research Working Papers 1833, Harvard - Institute of Economic Research.
    4. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    5. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 469-497, May.
    6. Robert E Lucas, 1999. "Making a Miracle," Levine's Working Paper Archive 2101, David K. Levine.
    7. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
    8. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
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