A model of technology adoption and growth

Summary We construct a model of economic growth in which firms adopt more advanced technologies. In order to advance its technology, a firm must make an investment. The size of this investment depends on the size of the technology adoption barriers in the firm's country Assuming a Markov chain for these barriers, we examine the amount of variation and persistence in the chain for which the model matches the observed output disparity across countries and the mobility of nations. Our calibration suggests a range for the size of these barriers of a factor five, and the presence of a barrier trap.The author is grateful to V. V. Chari, Larry Christiano, Javier Díaz-Giménez, David Johnson, Edward C. Prescott, Richard Rogerson, James Schmitz, and Javier Vallés for their comments. An earlier version of this paper circulated under the title of Economic Institutions and External Factors: Implications for the Replacement of Inferior Technologies and Growth.