Technology gaps, trade and income
This paper quantifies the contribution of technology gaps to international income inequality. I develop an endogenous growth model where cross-country differences in R&D efficiency and cross-industry differences in innovation and adoption opportunities together determine equilibrium technology gaps, trade patterns, and income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries. I calibrate R&D efficiency by country and innovation dependence by industry using R&D, patent, and bilateral trade data. Counterfactual analysis implies technology gaps account for one-quarter to one-third of nominal wage variation within the OECD.
1 February 2023
American Economic Review 113(2) , pp.472-513, 2023
https://www.aeaweb.org/articles?id=10.1257/aer.20201940
This Journal article is published under the centre's Trade programme.