Intangible Capital, Barriers to Technology Adoption and Cross-Country Income Differences

Hashmi, Aamir Rafique (2007): Intangible Capital, Barriers to Technology Adoption and Cross-Country Income Differences. Unpublished.

Abstract

I add intangible capital to a variant of the neoclassical growth model and study the implications of this extension for cross-country income differences. I calibrate the parameters associated with intangible capital by using new estimates of investment in intangibles by Corrado et al. [2006]. I find that the addition of intangible capital significantly improves the model's ability to account for cross-country income differences. Specifically, when intangible capital is added to the model, the required TFP ratio to explain observed income differences falls from 4.05 to 2.97. I also study variants of the model with endogenous and exogenous barriers to accumulation of technology capital, which consists of intangible capital and a fraction of physical capital that embodies technology. The addition of endogenous barriers, for reasonable parameter values, has a very small positive effect on the ability of the model to account for income differences. The addition of exogenous barriers suggests that huge cross-country differences in such barriers are needed to generate the observed income differences.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cross-country Income Differences; Intangible Capital; Technology Adoption
• Subjects: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity