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Directed technological change & cross-country income differences: A quantitative analysis

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  • Jerzmanowski, Michal
  • Tamura, Robert

Abstract

Understanding international income differences requires measuring supplies of multiple production factors and their productivity. Recent work suggests that heterogeneous workers should be treated as imperfect substitutes. Using a model of endogenous directed technological change and a new data set on labor force composition we construct productivity for workers in three skill categories for 63 countries from 1910 to 2010 (up to 83 additional countries for 1950–2010). Rich countries use all skill categories more efficiently. Poor countries have a large technology adoption wedge, which prevents them from using low-skill labor more efficiently. Reducing the technology adoption wedges would have a much larger impact on standards of living than skill upgrading of the workforce.

Suggested Citation

  • Jerzmanowski, Michal & Tamura, Robert, 2019. "Directed technological change & cross-country income differences: A quantitative analysis," Journal of Development Economics, Elsevier, vol. 141(C).
  • Handle: RePEc:eee:deveco:v:141:y:2019:i:c:s0304387818305820
    DOI: 10.1016/j.jdeveco.2019.102372
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    1. Jerzmanowski, Michal & Tamura, Robert, 2020. "Aggregate Elasticity of Substitution between Skills: Estimates from a Macroeconomic Approach," MPRA Paper 100768, University Library of Munich, Germany.

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    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • J0 - Labor and Demographic Economics - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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