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  • Ana Fernandes

    (CEMFI)

  • Krishna B. Kumar

    (University of Southern California)

Abstract

In this paper, we investigate incentives other than altruism that developed countries have in improving technologies specific to developing countries. We propose a simple model of international trade between two regions, in which all individuals have similar preferences over an inferior good and a luxury good. The poor region has a comparative advantage in the production of the inferior good, and the rich in the luxury good. Even when costly adaptation of the technology to the poor region's characteristics is required -- which makes the technology inappropriate for local use -- we show that there are parameter configurations for which the rich region has an incentive to incur this cost. By raising the efficiency of the productive process of the developing region, the developed region can redirect its own productive resources toward the luxury good; it can also gain access to a more diversified set of consumption choices. Indeed, there are cases where the rich region would prefer to improve the poor region's technology for producing the inferior good rather than its own. Such technology transfers can increase the welfare of both regions. We apply our model to the Green Revolution and provide a quantitative assessment of its welfare effects.

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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0304003.

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Length: 43 pages
Date of creation: 04 Apr 2003
Date of revision:
Handle: RePEc:wpa:wuwpdc:0304003

Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on HP PostScript; pages: 43; figures: included
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Web page: http://128.118.178.162

Related research

Keywords: Technology improvements; Dynamic trade models; Welfare analysis;

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References

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  1. Kiminori Matsuyama, 2000. "A Ricardian Model with a Continuum of Goods under Nonhomothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(6), pages 1093-1120, December.
  2. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  3. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  4. Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Productivity Differences," Seminar Papers, Stockholm University, Institute for International Economic Studies 660, Stockholm University, Institute for International Economic Studies.
  5. Chatterjee, Satyajit & Ravikumar, B., 1999. "Minimum Consumption Requirements: Theoretical And Quantitative Implications For Growth And Distribution," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 3(04), pages 482-505, December.
  6. John Luke Gallup & Jeffrey D. Sachs, 2000. "The Economic Burden of Malaria," CID Working Papers, Center for International Development at Harvard University 52, Center for International Development at Harvard University.
  7. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  8. Morisset, Jacques, 1998. "Unfair Trade? The Increasing Gap between World and Domestic Prices in Commodity Markets during the Past 25 Years," World Bank Economic Review, World Bank Group, World Bank Group, vol. 12(3), pages 503-26, September.
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