Working Paper

The Labor Market Consequences of Appropriate Technology

Abstract: Developing countries rely on technology created by developed countries. This paper demonstrates that such reliance increases wage inequality but leads to greater production in developing countries. I study a Brazilian innovation program that taxed the leasing of international technology to subsidize national innovation. I show that the program led firms to replace technology licensed from developed countries with in-house innovations, which led to a decline in both employment and the share of high-skilled workers. Using a model of directed technological change and technology transfer, I find that increasing the share of firms that patent in Brazil by 1 p.p. decreases the skilled wage premium by 0.02% and production by 0.2%

Keywords: appropriate technology; directed technological change; innovation;

JEL Classification: O11; O33; O38;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2022-09-06

Number: WP 2022-53