Why Don't Poor Countries Adopt Better Technologies?

Sylvain Dessy () and Stephane Pallage

No 20-07, Cahiers de recherche du Département des sciences économiques, UQAM from Université du Québec à Montréal, Département des sciences économiques

Abstract: In this paper we develop a simple heterogeneous-agent model with incomplete markets to explain the prevalence of a large low-productivity, informal sector in developing countries. In our model, the provision of public infrastructure creates a productivity premium for formalization, which increases with infrastructure quality. Our model breaks the symmetry of equilibria and offers endogenous differentiation of rich and poor countries' behavior. While the model supports multiple stable equilibria in `rich' countries with varying degrees of formalization, including full formalization, it indicates an absence of equilibrium with full formalization in `poorer' countries. If legislative intolerance alone suffices to jolt a rich country into the equilibrium with complete formalization, accompanying policies may be required in poor countries to first provide the conditions for existence of such equilibrium.

Keywords: Technology adoption; informal sector; industrialization; inequality; infrastructure (search for similar items in EconPapers)
JEL-codes: H54 O12 O14 (search for similar items in EconPapers)
Pages: 19
Date: 2001-03
New Economics Papers: this item is included in nep-dev, nep-dge and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming (revised version) in Journal of Development Economics, under the title `Taxes, Inequality and the Size of the Informal Sector'

Downloads: (external link)
http://www.unites.uqam.ca/eco/cahiers/wp20-07.pdf Main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.unites.uqam.ca/eco/cahiers/wp20-07.pdf [301 Moved Permanently]--> https://unites.uqam.ca/eco/cahiers/wp20-07.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:cre:uqamwp:20-07

Access Statistics for this paper

More papers in Cahiers de recherche du Département des sciences économiques, UQAM from Université du Québec à Montréal, Département des sciences économiques P.O. Box 8888, Downtown Station, Montreal (Canada) Quebec, H3C 3P8. Contact information at EDIRC.
Bibliographic data for series maintained by Stéphane Pallage ().