Building blocks for barriers to riches
By: Narayana R. Kocherlakota.
Series: Federal Reserve Bank of Minneapolis, Research Department staff report ;; 288; Staff report (Federal Reserve Bank of Minneapolis. Research Dept. : Online) ;; 288.
Publisher: Federal Reserve Bank of Minneapolis
Published: 2001
Place of publication: [Minneapolis, Minn.]
Language: eng
Format: Electronic resource
Subjects: Industrial productivity -- Econometric models.
Description: Total factor productivity (TFP) differs greatly across countries.In this paper, I provide a novel rationalization for these differences.I consider two environments, one in which enforcement is full and the other in which enforcement is limited.In both settings, manufactured goods can be produced using a high-TFP technology or a low-TFP technology; there is a fixed cost associated with adoption of the former.I suppose that the fixed cost is sufficiently small that adoption takes place in a symmetric Pareto optimum in the limited-enforcement setting.Under this condition, I prove two results.First, adoption takes place in all Pareto optima in the full-enforcement setting.Second, adoption may not take place in a Pareto optimum in the limited-enforcement setting, if the division of social surplus is sufficiently unequal.I conclude that limited enforcement and high inequality interact to create particularly strong barriers to riches - in the language of Parente and Prescott (1999, 2000)--Federal Reserve Bank of Minneapolis web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/15/2005.
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Mode of access: World Wide Web.