The Labor Market Consequences of Appropriate Technology

152 Pages Posted: 7 Nov 2022

Date Written: April 23, 2024


Developing countries rely on technology created by developed countries. I show that such reliance increases wage inequality but leads to greater production in developing countries. I study a Brazilian innovation program that taxed the transfer of international technology, such as patent licenses or technical consulting, to subsidize national innovation. The program induced firms to replace technology transferred from developed countries with in-house innovations, which led to a decline in both employment and the share of high-skilled workers. Using a model of directed technological change and technology transfer, I find that closing Brazil to international technology transfers would decrease the skilled wage premium by 1% and GDP by 28%.

Keywords: technology transfers, appropriate technology, macroeconomic development, innovation JEL Codes: O11, O33, O38, O11

JEL Classification: O11, O33, O38

Suggested Citation

de Souza, Gustavo, The Labor Market Consequences of Appropriate Technology (April 23, 2024). FRB of Chicago Working Paper No. 2022-53, Available at SSRN: or

Gustavo De Souza (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

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