The Perils of Asymmetrical Technological Changes in a Knowledge Economy with Complete Markets

Paolo Morganti () and Rosa Carolina Valdes
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Paolo Morganti: Facultad de Ciencias Económicas y Empresariales, Universidad Panamericana, Augusto Rodin 498, Ciudad de México 03920, Mexico
Rosa Carolina Valdes: Facultad de Ciencias Económicas y Empresariales, Universidad Panamericana, Augusto Rodin 498, Ciudad de México 03920, Mexico

Sustainability, 2023, vol. 15, issue 17, 1-17

Abstract: How does the asymmetrical adoption of advanced communication technology affect economic and social sustainability? We examined the impact of Industry 4.0 on these two pillars of sustainability, focusing on the productivity divide arising from the asymmetric adoption of advanced technologies. We used a theoretical, general equilibrium model to describe a population within a knowledge economy with complete markets who gets exposed to a generally available advanced technology. Our main assumption was that only the more-knowledgeable individuals are able to adopt or fully benefit from the technology, leaving the unskilled ones behind. We demonstrate that this asymmetry prevents the property of positive sorting to apply, leading to a failure to sustain an equilibrium. The divide between knowledgeable and less-skilled individuals poses challenges for workers situated around the boundary, who face penalties in terms of employability and cost-effectiveness. Bridging this skill gap is crucial for inclusive growth. Policy recommendations include retraining programs, accessible education, and targeted policies promoting technology diffusion. As a possible extension, the model could be adapted to analyze collective bargaining agreements.

Keywords: market failure; knowledge economy; asymmetrical technological change; equilibrium (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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