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Why doesn’t technology flow from rich to poor countries?

  • Harold L. Cole
  • Jeremy Greenwood
  • Juan M. Sánchez

What determines the technology that a country adopts? While there could be many factors, the efficiency of the country’s financial system may play a significant role. To address this question, a dynamic contract model is embedded into a general equilibrium setting with competitive interme- diation. The ability of an intermediary to monitor and control the cash flows of a firm plays an important role in a firm’s decision to adopt a technology. Can such a theory help to explain the differences in total factor productivity and establishment-size distributions across India, Mexico, and the U.S.? Applied analysis suggests that answer is yes.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2012-040.

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Date of creation: 2012
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Handle: RePEc:fip:fedlwp:2012-040
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