On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates

Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of St. Louis
Working Papers
Why doesn’t technology flow from rich to poor countries?
Harold L. Cole
Jeremy Greenwood
Juan M. Sánchez
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.


Download Full text
Cite this item
Harold L. Cole & Jeremy Greenwood & Juan M. Sánchez, Why doesn’t technology flow from rich to poor countries?, Federal Reserve Bank of St. Louis, Working Papers 2012-040, 2012, revised 01 Oct 2015.
More from this series
JEL Classification:
Subject headings:
Keywords: Cash flow; Economic development; Technology - Economic aspects; India; Mexico
For corrections, contact Anna Oates ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal