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Why Doesn't Technology Flow from Rich to Poor Countries?

  • Juan Sanchez

    (Federal Reserve Bank of St. Louis)

  • Jeremy Greenwood

    (University of Pennsylvania)

  • Harold Cole

    (University of Pennsylvania)

What determines the choice of technology within a country? 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 ompetitive intermediation. The ability of an intermediary to monitor and control the cash flows of a firm plays an important role in the decision to underwrite technology adoption. Can such a theory help to explain the differences in TFP and establishment-size distributions between India, Mexico and the U.S.? Some applied analysis suggests that answer is yes.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 834.

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Date of creation: 2012
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Handle: RePEc:red:sed012:834
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