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

Harold Cole, Jeremy Greenwood and Juan Sanchez

No 25, Economie d'Avant Garde Research Reports from Economie d'Avant Garde

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. In Econometrica (July 2016), v. 84, n. 4: 1477-1521.

Keywords: Costly cash-flow control; costly state verification; dynamic contract theory; economic development; establishment-size distributions; finance and development; financial intermediation; India, Mexico, and the United States; long- and short-term contract; monitoring; productivity; retained earnings; self-finance; technology adoption; ventures (search for similar items in EconPapers)
JEL-codes: E13 O11 O16 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Related works:
Journal Article: Why Doesn't Technology Flow From Rich to Poor Countries? (2016)
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? (2012)
Working Paper: Why Doesn't Technology Flow from Rich to Poor Countries? (2012)
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