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  3. American Economic Review
  4. February 2023
  5. Technology Gaps, Trade, and Income

Technology Gaps, Trade, and Income

  • Thomas Sampson
American Economic Review
vol. 113, no. 2, February 2023
(pp. 472-513)
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Abstract

This paper quantifies the contribution of technology gaps to international income inequality. I develop an endogenous growth model where cross-country differences in R&D efficiency and cross-industry differences in innovation and adoption opportunities together determine equilibrium technology gaps, trade patterns, and income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries. I calibrate R&D efficiency by country and innovation dependence by industry using R&D, patent, and bilateral trade data. Counterfactual analysis implies technology gaps account for one-quarter to one-third of nominal wage variation within the OECD.

Citation

Sampson, Thomas. 2023. "Technology Gaps, Trade, and Income." American Economic Review, 113 (2): 472-513. DOI: 10.1257/aer.20201940

Additional Materials

JEL Classification

  • D21 Firm Behavior: Theory
  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • D31 Personal Income, Wealth, and Their Distributions
  • F14 Empirical Studies of Trade
  • O31 Innovation and Invention: Processes and Incentives
  • O33 Technological Change: Choices and Consequences; Diffusion Processes
  • O47 Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence