TECHNOLOGICAL ASYMMETRIES, CONVERGENCE AND DIVERGENCE IN A NORTH-SOUTH GROWTH MODEL

Mario Cimolli (CEPAL)
Marcio Holland (Center for Latin American Studies, University of California, Berkeley)
Gabriel Porcile (Federal University of Parana, Brazil) 
This paper discusses the conditions that lead to convergence or divergence in the international economy in the context of a Ricardian model with a continuum of goods. The model assumes that there are two countries, the North (which is the technological leader) and the South (which is the follower). The ability of the South to diversify its economy depends on its efforts for learning and catching-up with Northern technology. These efforts redefine competitive advantages and allow the South to expand the number of goods it produces. In doing so, the South is able to grow at higher rates than the North while keeping the current account in equilibrium. Thus, convergence results from technological learning and structural change enlarging the Southern productive structure. The results of the model are tested by regressing rates of economic growth on proxies for technological capabilities and for the complexity of the export structure. The empirical analysis is based on a panel of 60 countries and confirms that both technological efforts and a dynamic pattern of specialization are key conditions for international convergence.