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INAPPROPRIATE TECHNOLOGY What Is in It for the Rich?

Published online by Cambridge University Press:  15 August 2007

ANA FERNANDES  and
KRISHNA B. KUMAR
ANA FERNANDES
Affiliation:
University of Bern
KRISHNA B. KUMAR
Affiliation:
Fuqua School of Business, Duke University and RAND
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Abstract

In this paper, we investigate incentives, other than altruism, that developed countries have for improving developing country technologies. We propose a simple model of international trade between two regions, in which individuals have preferences over an inferior good and a luxury good. The poor region has a comparative advantage in the production of the inferior good. Even when costly adaptation of the technology to the poor region's characteristics is required—making the technology inappropriate for local use—there are parameter configurations for which the rich region has an incentive to incur this cost. It benefits from a terms-of-trade improvement and from greater specialization in the luxury good. Indeed, there are cases where the rich region would prefer to improve the poor region's technology for producing the inferior good rather than its own. We apply our model to the Green Revolution and provide a quantitative assessment of its welfare effects.

Keywords

Technology ImprovementsDynamic Trade ModelsWelfare Analysis
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 11 , Issue 4 , September 2007 , pp. 487 - 518
Copyright
© 2007 Cambridge University Press

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