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Neoclassical Growth and the Adoption of Technologies

Author

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  • Diego Comin
  • Bart Hobijn

Abstract

We introduce a growth model of technology diffusion and endogenous Total Factor Productivity (TFP) levels both at the sector and aggregate level. At the aggregate, the model behaves as the Neoclassical growth model. Our goal is for this model to bridge the gap between the theoretical and empirical studies of technology adoption and economic growth. We bridge this gap in three important directions. First of all, we use our model to show how one unified theoretical framework is broadly consistent with the observed dynamics of both economic growth as well as of many different measures of technology adoption, like adoption rates, capital to output ratios, and output ratios. Secondly, we estimate our model using a broad range of technological adoption measures, covering 17 technologies and 21 industrialized countries over the past 180 years. This allows us to show how its predicted adoption patterns fit those observed in the data. Finally, we estimate the disparities in sectoral productivity levels as well as aggregate TFP that can be attributed to the differences in the range of technologies in use across countries. These disparities are almost completely determined by the quality of the worst technology in use, rather than by the quality of the newest technology that has just been adopted or by the number of technologies in use. Further, we find that the TFP component attributable to the range of technologies used is highly correlated with overall sectoral TFP differences across countries, though the variance is smaller.

Suggested Citation

  • Diego Comin & Bart Hobijn, 2004. "Neoclassical Growth and the Adoption of Technologies," NBER Working Papers 10733, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10733
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    References listed on IDEAS

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    Cited by:

    1. Stoneman, Paul & Battisti, Giuliana, 2010. "The Diffusion of New Technology," Handbook of the Economics of Innovation, Elsevier.
    2. Boyan Jovanovic, 2004. "The Product Cycle and Inequality," NBER Working Papers 10910, National Bureau of Economic Research, Inc.
    3. Barseghyan, Levon & DiCecio, Riccardo, 2016. "Externalities, endogenous productivity, and poverty traps," European Economic Review, Elsevier, vol. 85(C), pages 112-126.
    4. Levon Barseghyan, 2008. "Entry costs and cross-country differences in productivity and output," Journal of Economic Growth, Springer, vol. 13(2), pages 145-167, June.

    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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