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Structural Development Accounting

  • Gino Gancia
  • Andreas Müller and Fabrizio Zilibotti

In this paper, we construct and estimate a unified model combining three of the main sources of cross-country income disparities: differences in factor endowments, barriers to technology adoption and the inappropriateness of frontier technologies to local conditions. The key components of our framework are di€erent types of workers (skilled and unskilled labor), distortions to capital accumulation, directed technical change, costly adoption and spillovers from the world technology frontier. Despite its parsimonious parametrization, our empirical model provides a good fit of GDP data for up to 90 countries in 1970 and 2000. We use the model to assess the relative importance of alternative factors a€ecting the world income distribution and to perform counterfactual experiments. Our results suggests that removing barriers to technology adoption would increase output of the average OECD economy relative to the US frontier from 68.3% to 92.5%. The average non-OECD country would instead increase from 17.4% to 53.8%. Slashing barriers would also lead to higher skill premia in all countries. We also study how globalization can shape income disparities. In the absence of global IPR protection, we find that trade in goods amplifies income disparities, induces skill-biased technology adoption and increases skill premia in the majority of countries. These results are reverted if trade liberalization is coupled with international protection of IPR.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 494.

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Date of creation: Aug 2010
Date of revision:
Handle: RePEc:bge:wpaper:494
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  1. Gino Gancia & Fabrizio Zilibotti, 2009. "Technological Change and the Wealth of Nations," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 93-120, 05.
  2. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
  3. Parente, Stephen L. & Prescott, Edward C., 2005. "A Unified Theory of the Evolution of International Income Levels," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 21, pages 1371-1416 Elsevier.
  4. Acemoglu, Daron & Gancia, Gino & Zilibotti, Fabrizio, 2012. "Competing engines of growth: Innovation and standardization," Journal of Economic Theory, Elsevier, vol. 147(2), pages 570-601.e3.
  5. Gancia, Gino & Bonfiglioli, Alessandra, 2008. "North-South trade and directed technical change," Journal of International Economics, Elsevier, vol. 76(2), pages 276-295, December.
  6. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170 Elsevier.
  7. Fadinger, Harald, 2011. "Productivity differences in an interdependent world," Journal of International Economics, Elsevier, vol. 84(2), pages 221-232, July.
  8. Jaume Ventura, 2005. "A global view of economic growth," Economics Working Papers 849, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Diego Comin & Bart Hobijn, 2010. "An Exploration of Technology Diffusion," American Economic Review, American Economic Association, vol. 100(5), pages 2031-59, December.
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  18. Cohen, Daniel & Soto, Marcelo, 2001. "Growth and Human Capital: Good Data, Good Results," CEPR Discussion Papers 3025, C.E.P.R. Discussion Papers.
  19. Acemoglu, D. & Zilibotti, F., 1998. "Productivity Differences," Papers 660, Stockholm - International Economic Studies.
  20. Arvind Subramanian & Devesh Roy, 2001. "Who Can Explain The Mauritian Miracle: Meade, Romer, Sachs or Rodrik?," IMF Working Papers 01/116, International Monetary Fund.
  21. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  22. Diego Comin & Bart Hobijn, 2005. "Lobbies and Technology Diffusion," NBER Working Papers 11022, National Bureau of Economic Research, Inc.
  23. Diego Comin & William Easterly & Erick Gong, 2006. "Was the Wealth of Nations Determined in 1000 B.C.?," NBER Working Papers 12657, National Bureau of Economic Research, Inc.
  24. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  25. Antonio Ciccone & Giovanni Peri, 2004. "Long-run substitutability between more and less educated workers: Evidence from U.S. States 1950-1990," Economics Working Papers 764, Department of Economics and Business, Universitat Pompeu Fabra.
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