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Why doesn’t technology flow from rich to poor countries?

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  • Harold L. Cole
  • Jeremy Greenwood
  • Juan M. Sánchez

Abstract

What determines the technology that a country adopts? While there could be many factors, the efficiency of the country’s financial system may play a significant role. To address this question, a dynamic contract model is embedded into a general equilibrium setting with competitive interme- diation. The ability of an intermediary to monitor and control the cash flows of a firm plays an important role in a firm’s decision to adopt a technology. Can such a theory help to explain the differences in total factor productivity and establishment-size distributions across India, Mexico, and the U.S.? Applied analysis suggests that answer is yes.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2012-040.

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Date of creation: 2012
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Handle: RePEc:fip:fedlwp:2012-040

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Keywords: Cash flow ; Economic development ; Technology - Economic aspects ; India ; Mexico;

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  1. James Tybout, 1998. "Manufacturing Firms In Developing Countries: How Well Do They Do, And Why?," Development and Comp Systems 9805004, EconWPA.
  2. Stephen D. Williamson, 1984. "Costly Monitoring, Financial Intermediation, and Equilibrium Credit Rationing," Working Papers 583, Queen's University, Department of Economics.
  3. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  4. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2012. "Quantifying the Impact of Financial Development on Economic Development," RCER Working Papers 572, University of Rochester - Center for Economic Research (RCER).
  5. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
  6. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-91, September.
  7. Rui Castro & Gian Luca Clementi & Glenn MacDonald, 2004. "Investor Protection, Optimal Incentives, and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1131-1175, August.
  8. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  9. Todd Schoellman, 2012. "Education Quality and Development Accounting," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 388-417.
  10. Robert M. Townsend & Kenichi Ueda, 2010. "Welfare Gains From Financial Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(3), pages 553-597, 08.
  11. Fernandes, Ana & Phelan, Christopher, 2000. "A Recursive Formulation for Repeated Agency with History Dependence," Journal of Economic Theory, Elsevier, vol. 91(2), pages 223-247, April.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The missing North-South flow of technology
    by Economic Logician in Economic Logic on 2012-11-09 15:50:00
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Cited by:
  1. Chang-Tai Hsieh & Peter J. Klenow, 2012. "The Life Cycle of Plants in India and Mexico," NBER Working Papers 18133, National Bureau of Economic Research, Inc.
  2. Jeremy Greenwood & Juan Sanchez & Cheng Wang, 2013. "Quantifying the Impact of Financial Development on Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 194-215, January.
  3. Diego Restuccia & Richard Rogerson, 2013. "Misallocation and productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 1-10, January.

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