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The World Technology Frontier

  • Francesco Caselli
  • Wilbur John Coleman II

We study cross-country differences in the aggregate production function when skilled and unskilled labor are imperfect substitutes. We find that there is a skill bias in cross-country technology differences. Higher-income countries use skilled labor more efficiently than lower-income countries, while they use unskilled labor relatively and, possibly, absolutely less efficiently. We also propose a simple explanation for our findings: rich countries, which are skilled-labor abundant, choose technologies that are best suited to skilled workers; poor countries, which are unskilled-labor abundant, choose technologies more appropriate to unskilled workers. We discuss alternative explanations, such as capital-skill complementarity and differences in schooling quality. (JEL E13, E23, J31, O14)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.3.499
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 3 (June)
Pages: 499-522

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:3:p:499-522
Note: DOI: 10.1257/aer.96.3.499
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  1. Caselli, Francesco, 2004. "Accounting for Cross-Country Income Differences," CEPR Discussion Papers 4703, C.E.P.R. Discussion Papers.
  2. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  3. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  4. Daron Acemoglu & Fabrizio Zilbotti, 1999. "Productivity Differences," NBER Working Papers 6879, National Bureau of Economic Research, Inc.
  5. Caselli, Francesco & Gennaioli, Nicola, 2003. "Dynastic Management," CEPR Discussion Papers 3767, C.E.P.R. Discussion Papers.
  6. David N. Weil, 1996. "Appropriate Technology and Growth," Working Papers 96-24, Brown University, Department of Economics.
  7. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  8. Barro, Robert J. & Sala-i-Martin, Xavier, 1995. "Technological Diffusion, Convergence and Growth," CEPR Discussion Papers 1255, C.E.P.R. Discussion Papers.
  9. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
  10. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  11. Mark Doms & Timothy Dunne & Kenneth R. Troske, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 253-290.
  12. Ishac Diwan & Dani Rodrik, 1989. "Patents, Appropriate Technology, and North-South Trade," NBER Working Papers 2974, National Bureau of Economic Research, Inc.
  13. 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.
  14. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
  15. Francesco Caselli, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
  16. King, Robert G. & Levine, Ross & DEC, 1994. "Capital fundamentalism, economic development, and economic growth," Policy Research Working Paper Series 1285, The World Bank.
  17. Francesco Caselli & Wilbur John Coleman II, 2001. "Cross-Country Technology Diffusion: The Case of Computers," NBER Working Papers 8130, National Bureau of Economic Research, Inc.
  18. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  19. Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1127-1170.
  20. Dunne, Timothy & Schmitz, James A, Jr, 1995. "Wages, Employment Structure and Employer Size-Wage Premia: Their Relationship to Advanced-Technology Usage at US Manufacturing Establishments," Economica, London School of Economics and Political Science, vol. 62(245), pages 89-107, February.
  21. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
  22. Allen, Steven G, 2001. "Technology and the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 440-83, April.
  23. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306.
  24. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  25. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  26. Diamond, Peter & McFadden, Daniel & Rodriguez, Miguel, 1978. "Measurement of the Elasticity of Factor Substitution and Bias of Technical Change," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 5 McMaster University Archive for the History of Economic Thought.
  27. Douglas Gollin & Steven Parente & Richard Rogerson, 2003. "Structural Transformation and Cross-Country Income Differences," Levine's Working Paper Archive 506439000000000259, David K. Levine.
  28. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  29. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  30. Philippe Aghion & Peter Howitt & David Mayer-Foulkes, 2004. "The Effects of Financial Development on Convergence: Theory and Evidence," DEGIT Conference Papers c009_021, DEGIT, Dynamics, Economic Growth, and International Trade.
  31. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 517-549.
  32. Atkinson, Anthony B & Stiglitz, Joseph E, 1969. "A New View of Technological Change," Economic Journal, Royal Economic Society, vol. 79(315), pages 573-78, September.
  33. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
  34. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  35. Francesco Caselli & Daniel Wilson, 2003. "Importing Technology," NBER Working Papers 9928, National Bureau of Economic Research, Inc.
  36. Caselli, Francesco & Coleman II, Wilbur John, 1999. "How Regions Converge," CEPR Discussion Papers 2191, C.E.P.R. Discussion Papers.
  37. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
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