INAPPROPRIATE TECHNOLOGY What Is in It for the Rich?

Ana Fernandes and Krishna Kumar ()

Macroeconomic Dynamics, 2007, vol. 11, issue 04, pages 487-518

Abstract: In this paper, we investigate incentives, other than altruism, that developed countries have for improving developing country technologies. We propose a simple model of international trade between two regions, in which individuals have preferences over an inferior good and a luxury good. The poor region has a comparative advantage in the production of the inferior good. Even when costly adaptation of the technology to the poor region s characteristics is required making the technology inappropriate for local use there are parameter configurations for which the rich region has an incentive to incur this cost. It benefits from a terms-of-trade improvement and from greater specialization in the luxury good. Indeed, there are cases where the rich region would prefer to improve the poor region s technology for producing the inferior good rather than its own. We apply our model to the Green Revolution and provide a quantitative assessment of its welfare effects.

Date: 2007

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