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Conference Paper
Modernizing payments: no pain, no gain
Report
Building blocks for barriers to riches
Total factor productivity (TFP) differs greatly across countries. In this paper, I provide a novel rationalization for these differences. I consider two environments, one in which enforcement is full and the other in which enforcement is limited. In both settings, manufactured goods can be produced using a high-TFP technology or a low-TFP technology; there is a fixed cost associated with adoption of the former. I suppose that the fixed cost is sufficiently small that adoption takes place in a symmetric Pareto optimum in the limited-enforcement setting. Under this condition, I prove two ...
Working Paper
Transitional dynamics of output and factor income shares: lessons from East Germany
I evaluate the quantitative implications of technology change and government policies for output and factor income shares during East Germany's transition since 1990. I model an economy that gains access to a high productivity technology embodied in new plants. As existing low productivity plants decrease production, the capital income share varies due to variation in the profit share of these plants. Two policies - transfers and government-mandated wage increases - have opposite effects on output growth, but both contribute to reducing the capital share during the transition. The model's ...
Working Paper
Technological diversification
Why is GDP so much more volatile in poor countries than in rich ones? To answer this question, we propose a theory of technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks. As in endogenous growth models, technological progress increases the number of varieties, raising average productivity. The new insight is that an expansion in the number of varieties also lowers the volatility of output. This is because additional varieties provide diversification benefits against variety-specific shocks. In the model, ...
Working Paper
Immigration, skill mix, and the choice of technique
Using detailed plant-level data from the 1988 and 1993 Surveys of Manufacturing Technology, this paper examines the impact of skill mix in U.S. local labor markets on the use and adoption of automation technologies in manufacturing. The level of automation differs widely across U.S. metropolitan areas. In both 1988 and 1993, in markets with a higher relative availability of less skilled labor, comparable plants ? even plants in the same narrow (4-digit SIC) industries ? used systematically less automation. Moreover, between 1988 and 1993 plants in areas experiencing faster less-skilled ...
Conference Paper
Innovation in non-bank payment systems: remarks (Bank of America)
Report
Openness, technology capital, and development
In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. What distinguishes technology capital from other forms of capital is the fact that a firm can use it simultaneously in multiple domestic and foreign locations. Foreign technology capital is exploited by permitting foreign direct investment by multinationals. In both steady-state and transitional analyses, the ...
Working Paper
Why doesn’t technology flow from rich to poor countries?
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 ...
Journal Article
Job polarization and rising inequality in the nation and the New York-northern New Jersey region
Since the 1980s, employment opportunities in both the United States and the New York?northern New Jersey region have become increasingly polarized. While technological advances and globalization have created new jobs for workers at the high end of the skill spectrum and largely spared the service jobs of workers at the low end, these forces have displaced many jobs involving routine tasks?traditionally the sphere of middle-skill workers. Moreover, these same forces have pushed up wages for high-skill workers disproportionately, contributing to increased wage inequality. The rise in inequality ...