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INAPPROPRIATE TECHNOLOGY What Is in It for the Rich?

  • FERNANDES, ANA
  • KUMAR, KRISHNA B.

In this paper, we investigate incentives, other than altruism, that developed countries have for improving developing country technologies. We propose a simple model of international trade between two regions, in which individuals have preferences over an inferior good and a luxury good. The poor region has a comparative advantage in the production of the inferior good. Even when costly adaptation of the technology to the poor region s characteristics is required making the technology inappropriate for local use there are parameter configurations for which the rich region has an incentive to incur this cost. It benefits from a terms-of-trade improvement and from greater specialization in the luxury good. 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. We apply our model to the Green Revolution and provide a quantitative assessment of its welfare effects.

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Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 11 (2007)
Issue (Month): 04 (September)
Pages: 487-518

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Handle: RePEc:cup:macdyn:v:11:y:2007:i:04:p:487-518_06
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