An International Comparison of Technology Adoption and Efficiency: A Dynamic Panel Model

We propose a dynamic model that estends the neoclassical growth model by including technology diffusion and possible inefficiency caused by institutional rigidities. We use alternative panel data methods to estimate the model for three regions: Europe, Latin America and East Asia. Our results strongly indicate that the technology gap to the leader nation is a significant source of growth, but that regions differ in their absorption capability. In addition, countries show large heterogeneity. When combining the country-specific effects with regional absorption capabilities, we obtain robust "efficiency" results for each country. The estimated efficiency levels are consistent with common beliefs and significantly explained by institutional variables such as bureaucratic efficiency and political and civil rights.

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