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  • Costly technology adoption, redistribution and growth

    Author(s)
    Lahiri, Radhika
    Ratnasiri, Shyama
    Griffith University Author(s)
    Ratnasiri, Shyama G.
    Year published
    2013
    Metadata
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    Abstract
    We study a political economy model which aims to understand the diversity in the growth and technology-adoption experiences in different economies. In this model the cost of technology adoption is endogenous and varies across heterogeneous agents. Agents in the model vote on the proportion of revenues allocated towards such expenditures. In the early stages of development, the political-economy outcome of the model ensures that a sub-optimal proportion of government revenue is used to finance adoption-cost reducing expenditures. This sub-optimality is due to the presence of inequality; agents at the lower end of the distribution ...
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    We study a political economy model which aims to understand the diversity in the growth and technology-adoption experiences in different economies. In this model the cost of technology adoption is endogenous and varies across heterogeneous agents. Agents in the model vote on the proportion of revenues allocated towards such expenditures. In the early stages of development, the political-economy outcome of the model ensures that a sub-optimal proportion of government revenue is used to finance adoption-cost reducing expenditures. This sub-optimality is due to the presence of inequality; agents at the lower end of the distribution favor a larger amount of revenue allocated towards redistribution in the form of lump-sum transfers. Eventually all individuals make the switch to the better technology and their incomes converge. The outcomes of the model therefore explain why public choice is more likely to be conservative in nature; it represents the majority choice given conflicting preferences among agents. Consequently, the transition path towards growth and technology adoption varies across countries depending on initial levels of inequality.
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    Journal Title
    Economic Modelling
    Volume
    33
    DOI
    https://doi.org/10.1016/j.econmod.2013.04.038
    Subject
    Macroeconomic theory
    Applied economics
    Econometrics
    Banking, finance and investment
    Publication URI
    http://hdl.handle.net/10072/55556
    Collection
    • Journal articles

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