Does Trade and Technology Transmission Facilitate Convergence? The Role of Technology Adoption in Reducing the Inequality of Nations.

Abstract

Based on stylized evidence showing variation of the Gini coefficients of income inequality across skill cohorts with the rapid rise in trade in technology-intensive goods, the transmission effects of technology diffusion and income inequality are explored in a global Computable General Equilibrium (CGE) framework. An exogenous technology shock transmitted via trade from the United States induces productivity growth in developing regions. This spillover in technology - aided by absorptive capability, better governance and institutions, technological symmetry and social acceptance - causes income to increase and income inequality to decline. The transmission of technology facilitates convergence of inequality between nations.