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Directed Technical Change, Technology Adoption and the Resource Curse Hypothesis

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  • George Adu

Abstract

This paper analyses the effect of asymmetry in factor endowments between resourcerich and resource-poor countries on equilibrium bias of technology development and adoption possibilities. First, we show that the bias in equilibrium technology in the resource-poor North is determined by its relative abundance of human capital and physical capital. Secondly, we show that the equilibrium bias in technology in the resource-abundant South is dependent positively (negatively) on the relative abundance (scarcity) of skilled (unskilled) labour and the relative abundance (scarcity) of physical (natural) capital in the North. This force is dampened by the relative scarcity of skilled labour and physical capital in the South. These forces drive wage inequality, high cost of capital and skill technology mismatch in the South, all of which are bad for growth. These effects cumulatively explain part of the observed differences in growth performance between resource-rich and resource-poor countries.

Suggested Citation

  • George Adu, 2015. "Directed Technical Change, Technology Adoption and the Resource Curse Hypothesis," Prague Economic Papers, Prague University of Economics and Business, vol. 2015(4), pages 452-472.
    • Handle: RePEc:prg:jnlpep:v:2015:y:2015:i:4:id:547:p:452-472
    DOI: 10.18267/j.pep.547
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    References listed on IDEAS

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    1. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies, vol. 22(4), pages 570-615, August.
    2. Pietro F. Peretto & Simone Valente, 2010. "Resource Wealth, Innovation and Growth in the Global Economy," CER-ETH Economics working paper series 10/124, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
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    5. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    6. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
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    More about this item

    Keywords

    human capital; directed technical change; directed technology adoption; natural capital; physical capital; North; South;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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