DP2498 Productivity Differences

Author(s): Daron Acemoglu, Fabrizio Zilibotti
Publication Date: July 2000
Keyword(s): Development, Directed Technical Change, Human Capital, Intellectual Property Rights, Labour Productivity, Sectoral TFP Differences, Technology-Skill Mismatch, Total Factor Productivity
JEL(s): F43, O14, O34, O47
Programme Areas: International Macroeconomics, Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2498

Many technologies used by the LDCs are developed in the OECD economies and are designed to make optimal use of the skills of these richer countries' workforces. Differences in the supply of skills create a mismatch between the requirements of these technologies and the skills of LDC workers, and lead to low productivity in the LDCs. Even when all countries have equal access to new technologies, this technology-skill mismatch can lead to sizeable differences in total factor productivity and output per worker. We provide evidence in favour of the cross-industry productivity patterns predicted by our model, and also show that technology-skill mismatch could account for a large fraction of the observed output per worker differences in the data.