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

Harold Cole, Jeremy Greenwood and Juan Sanchez

Econometrica, 2016, vol. 84, 1477-1521

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.

Date: 2016
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Journal Article: Why Doesn't Technology Flow From Rich to Poor Countries? (2016)
Working Paper: Why Doesn't Technology Flow from Rich to Poor Countries? (2016)
Working Paper: Why Doesn't Technology Flow from Rich to Poor Countries? (2015)
Working Paper: Why Doesn't Technology Flow from Rich to Poor Countries? (2014)
Working Paper: Why doesn’t technology flow from rich to poor countries? (2012)
Working Paper: Why Doesn't Technology Flow from Rich to Poor Countries? (2012)
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