Technological Change and Uneven Economic Development

Abstract

Broadly speaking, this dissertation studied how technological change operates to determine the fortune of places. Thus linking the global urgency to understand the current level of disparities in terms of wealth and income with the idea that these disparities are, to a large extent, determined by the capacity of individuals to collectively accumulate knowledge and know-how. Such a venture required overcoming two major obstacles. On the one hand, it required developing advanced modellistic tools capable characterizing the mechanisms and channels that relate technological change with economic progress. On the other hand, assessing the impact of the emergence, development, and diffusion of key technologies over time and space required constructing a unique database with disaggregated information on inventive activities of places for the last 150 years. Results show that the development of new technologies is a highly cumulative and path dependent process, in which technological upgrading emerges out of pre-existing knowledge bases and patterns of specialization. The likelihood of diversification into a new technological activity is higher for those domains that are related to countries' existing profile of competences. Countries climb the ladder of technological development rung by rung, as new capabilities have to be built-up gradually. Additionally, technological diversification is more heavily constrained by related indigenous capabilities at early stages of development. This dissertation also documents the existence of a high degree of heterogeneity in terms of how countries distribute their technological capabilities across sectors. More importantly, this heterogeneity appears to be highly correlated with international trade flows. To explain this, Chapter 4 brings forward the crucial role of the allocation of technological capabilities to determine trade patterns by incorporating within-country technological dispersion into an Eaton-Kortum trade model. As a result, this model is able to explain how countries’ overall comparative advantage (which determines overall exports) depend on technological dispersion. Countries with lower input costs and low levels of technological accumulation can benefit (increase their overall exports) by lowering the dispersion of their technological activities. Last but not least, Chapter 5 comes to fill one of the main empirical gaps in the innovation literature, providing comprehensive empirical evidence about the effect of the diffusion of a General Purpose Technology (GPT) over the economy. By relying on historical patents documents, this chapter provides a comprehensive view of the emergence, evolution, development, and diffusion of Electrical & Electronic (E&E) technologies in their historical context. It shows that the behaviour of E&E technologies between 1860 and 1930 is in line with what can be expected from a GPT, namely: Above-average growth rates in patenting activity, the development of a wide variety of innovation complementarities, and a high degree of pervasiveness in the U.S. inventive structure. More importantly, and after combining the database developed in Chapter 3 with economic and demographic data at the county level, this Chapter 5 shows that the adoption of E&E technologies had a positive effect on wages and the income per capita growth of places after the 1900's, generating uneven and durable disparities across counties.