Mismatch and Assimilation

Ping Wang, Russell Wong and Chong Yip

No 24960, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Income disparity across countries has been large and widening over time. We develop a tractable model where factor requirements in production technology do not necessarily match a country's factor input profile. Appropriate assimilation of frontier technologies balances such multi-dimensional factor input-technology mismatch, thus mitigating the efficiency loss. This yields a new measure for endogenous TFP, entailing a novel trade-off between a country's income level and income growth that depends critically on the assimilation ability and the factor input mismatch. Our baseline model accounts for 80%-92% of the global income variation over the past 50 years. The widening of mismatch and heterogeneity in the assimilation ability account for 41% and 20% of the global growth variation, whereas physical capital accounts for about one third with human capital largely inconsequential. In particular, about 30% of the output growth in miracle Asian economies comes from narrowing the gap arisen from mismatch, and 94% of the growth stagnation in trapped African economies due to the widening mismatch. A country may fall into a middle-income trap after a factor advantage reversal that changes the pattern of mismatch.

JEL-codes: D90 E23 O40 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-eff and nep-sea
Note: DEV EFG PR
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.nber.org/papers/w24960.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:24960

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w24960

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().