Mismatch and Assimilation / Ping Wang, Tsz-Nga Wong, Chong K. Yip.

Format:

Book

Author/Creator:

Wang, Ping.

Contributor:

National Bureau of Economic Research.

Wong, Tsz-Nga.

Yip, Chong K.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24960.

NBER working paper series no. w24960

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

Income disparity across countries has been large and widening over time. We develop a tractable model where factor requirements in production technology do not necessarily match a country's factor input profile. Appropriate assimilation of frontier technologies balances such multi-dimensional factor input-technology mismatch, thus mitigating the efficiency loss. This yields a new measure for endogenous TFP, entailing a novel trade-off between a country's income level and income growth that depends critically on the assimilation ability and the factor input mismatch. Our baseline model accounts for 80%-92% of the global income variation over the past 50 years. The widening of mismatch and heterogeneity in the assimilation ability account for 41% and 20% of the global growth variation, whereas physical capital accounts for about one third with human capital largely inconsequential. In particular, about 30% of the output growth in miracle Asian economies comes from narrowing the gap arisen from mismatch, and 94% of the growth stagnation in trapped African economies due to the widening mismatch. A country may fall into a middle-income trap after a factor advantage reversal that changes the pattern of mismatch.

Notes:

Print version record

August 2018.