Working Paper 1249

Structural development accounting
Gino Gancia, Andreas Müller and Fabrizio Zilibotti
July 2010 (Revised: February 2011)
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 are different types of workers, 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 86 countries in 1970 and 122 countries in 2000. Removing barriers to technology adoption would increase the output per worker of the average non-OECD country relative to the US from 0.19 to 0.61, while increasing skill premia in all countries. Removing barriers to 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 IPR protection.
Directed Technology Adoption, Development Accounting, Distance to Frontier, Inappropriate Technologies, Skill-biased Technical Change, Productivity, TFP differences.
JEL codes:
F43, O11, O31, O33, O38, O41, O43, O47.
Area of Research:
Macroeconomics and International Economics
Published in:
Advances in Economics and Econometrics: Theory and Applications, D. Acemoglu, M. Arellano and E. Dekel (eds.),Tenth World Congress of the Econometric Society (Econometric Society Monographs), vol. II, 2013.

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