Productivity Differences and the Stage of Development: Where are the Bottlenecks?
Adoption of better technologies is a crucial way for developing countries to close productivity gaps with leading economies. However, the possibility of growing through adoption depends decisively on the country's absorptive capacity. We build a theoretical model of technology adoption that focuses on four factors that shape the absorptive capacity of countries, namely: i) quantity of education; ii) quality provided by the education system; iii) microeconomic flexibility that favors the entry and exit of firms; and iv) the overall institutional environment that enhances/impedes R&D activities. We calibrate the model for a sample of 78 economies. The United States is our benchmark leading economy. We disentangle the relative weight of each development factor in explaining per capita income differences and study patterns in relationships between the type of development barrier and the level of development. The effect on the steady-state gap of improving any of the aforementioned factors represents a trade-off between the initial gap and the value of the rest of the parameters. For instance, a relatively low level of market flexibility and quality of the education system are the main impediments that high-income economies face in closing the gap with the United States; the former explains almost forty percent of the gap for high-income countries, while the latter accounts for nearly twenty percent of this gap. A remarkable result is the small effect that individual reforms have on steady-state productivity in low-income countries. With the exception of R&D-favoring institutions, the remaining three factors are individually responsible for less than fifteen percent of the gap. This result is explained by a poor global economic environment that reduces the effect of each factor when implemented individually. In fact, there are significant nonlinearities between the level of development and the effects of individual reforms that are due to the strong complementarities between the different development factors. A high degree of development implies that the factors are at a high level, increasing the effects of particular reforms on steady-state productivity. However, it also reflects a small technology gap, which reduces their potential impact. The calibration shows that the effects are greatest for middle-income countries and lowest for low- and high-income countries.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Avda. Vicuña Mackenna 4860, Macul, Santiago|
Phone: (562) 354-4303
Fax: (562) 553-1664
Web page: http://www.economia.uc.cl
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
- Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
- Robert J. Barro & Jong-Wha Lee, 2010.
"A New Data Set of Educational Attainment in the World, 1950-2010,"
NBER Working Papers
15902, National Bureau of Economic Research, Inc.
- Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
- Daron Acemoglu & Fabrizio Zilbotti, 1999.
NBER Working Papers
6879, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Zilibotti, Fabrizio, 2000. "Productivity Differences," CEPR Discussion Papers 2498, C.E.P.R. Discussion Papers.
- Acemoglu, D. & Zilibotti, F., 1998. "Productivity Differences," Papers 660, Stockholm - International Economic Studies.
- Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Productivity Differences," Seminar Papers 660, Stockholm University, Institute for International Economic Studies.
- Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306.
- Todd Schoellman, 2012. "Education Quality and Development Accounting," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 388-417.
- Diego Restuccia & Richard Rogerson, 2008.
"Policy Distortions and Aggregate Productivity with Heterogeneous Plants,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
- Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," NBER Working Papers 13018, National Bureau of Economic Research, Inc.
- Richard Rogerson & Diego Restuccia, 2004. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," 2004 Meeting Papers 69, Society for Economic Dynamics.
- Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Working Papers tecipa-283, University of Toronto, Department of Economics.
- Diego Restuccia & Richard Rogerson, 2008. "Code for "Policy Distortions and Aggregate Productivity with Heterogeneous Plants"," Computer Codes 07-48, Review of Economic Dynamics.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
- Edward C. Prescott & Stephen L. Parente, 1999.
"Monopoly Rights: A Barrier to Riches,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1216-1233, December.
- Eric Bartelsman & John Haltiwanger & Stefano Scarpetta, 2013.
"Cross-Country Differences in Productivity: The Role of Allocation and Selection,"
American Economic Review,
American Economic Association, vol. 103(1), pages 305-34, February.
- Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2009. "Cross-Country Differences in Productivity: The Role of Allocation and Selection," IZA Discussion Papers 4578, Institute for the Study of Labor (IZA).
- Eric J. Bartelsman & John C. Haltiwanger & Stefano Scarpetta, 2009. "Cross-Country Differences in Productivity: The Role of Allocation and Selection," NBER Working Papers 15490, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ioe:doctra:430. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jaime Casassus)
If references are entirely missing, you can add them using this form.