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A Theory Of Digital Divide: Who Gains And Loses From Technological Changes?

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  • Yong Jin Kim

    () (Division of Economics, College of Social Science, Ajou University)

Abstract

This paper attempts to answer the question: How does the income gap between workers and capitalists evolve over time in the period of ITC and globalization increasing international technology creation and transfers? The model bases on a Romer¡¯s type of variety expansion of intermediate goods. We assume that there are two types of agents supplying two different types of factors. Workers supply specific skill weighted labor by accumulating their specific skills that depreciate with an introduction of new intermediate goods. The other type of agents, R&D agents, produce and sell new varieties of intermediate goods monopolistically after inventing them. The model yields: Depending on the elasticity of substitution between the two factors and on the value of the factor share, an increase in the efficiency of technology creation (or lowering the barriers on the imports of intermediate goods) affects the growth rates of workers¡¯ and R&D agents¡¯ average income differently. First, if the elasticity of substitution is greater than one, in a certain stage of development, an advance in ITC or ¡®globalization¡¯ increases the growth rate of R&D agents¡¯ average income, while it decreases that of workers¡¯. Thus, the ¡®Digital Divide¡¯ happens. Conversely, if the elasticity of substitution is less than one, the result will be reversed. These results are intuitively obvious. Second, if an economy develops from a higher factor share of the workers to a sufficiently lower one, the growth rates of GNP, and the average incomes of both workers and R&D agents increase over time.

Suggested Citation

  • Yong Jin Kim, 2003. "A Theory Of Digital Divide: Who Gains And Loses From Technological Changes?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 28(1), pages 1-22, June.
  • Handle: RePEc:jed:journl:v:28:y:2003:i:1:p:1-22
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    References listed on IDEAS

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    1. Helpman, Elhanan & Rangel, Antonio, 1999. "Adjusting to a New Technology: Experience and Training," Journal of Economic Growth, Springer, vol. 4(4), pages 359-383, December.
    2. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
    3. Lucas, Robert E, Jr, 1993. "Making a Miracle," Econometrica, Econometric Society, vol. 61(2), pages 251-272, March.
    4. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, March.
    5. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 469-497.
    6. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    7. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
    8. 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.
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    More about this item

    Keywords

    Romer¡¯s Model; R&D; Specific Skill; Digital Divide;

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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