Abstract

http://ssrn.com/abstract=1945981
 
 

References (36)



 


 



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


Harold L. Cole


University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Jeremy Greenwood


University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Juan M. Sánchez


Federal Reserve Banks - Federal Reserve Bank of Saint Louis

March 1, 2016


Abstract:     
What is the role of a country's financial system in determining technology adoption? To examine this, a dynamic contract model is embedded into a general equilibrium setting with competitive intermediation. The terms of finance are dictated by an intermediary's ability to monitor and control a firm's cash flow, in conjunction with the structure of the technology that the firm adopts. It is not always profitable to finance promising technologies. A quantitative illustration is presented where financial frictions induce entrepreneurs in India and Mexico to adopt less-promising ventures than in the United States, despite lower input prices.

Number of Pages in PDF File: 88

Keywords: Costly cash-flow control; costly state verification; dynamic contract theory; economic development; establishment-size distributions; finance and development; financial intermediation; India, Mexico, and the United States; long- and short-term contracts; monitoring; productivity; retained earnings

JEL Classification: D92, E13, G24, O11, O16


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Date posted: October 20, 2011 ; Last revised: March 3, 2016

Suggested Citation

Cole, Harold L. and Greenwood, Jeremy and Sánchez, Juan M., Why Doesn't Technology Flow from Rich to Poor Countries? (March 1, 2016). Available at SSRN: http://ssrn.com/abstract=1945981 or http://dx.doi.org/10.2139/ssrn.1945981

Contact Information

Harold L. Cole (Contact Author)
University of Pennsylvania - Department of Economics ( email )
3718 Locust Walk
436 McNeil
Philadelphia, PA 19104
United States
215-898-7788 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jeremy Greenwood
University of Pennsylvania - Department of Economics ( email )
160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-1505 (Phone)
HOME PAGE: http://jeremygreenwood.net
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Juan M. Sanchez
Federal Reserve Banks - Federal Reserve Bank of Saint Louis ( email )
411 Locust St
Saint Louis, MO 63011
United States
Feedback to SSRN


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