Structural Development Accounting

In this paper, we construct and estimate a uni\u85ed model combining three of the main sources of cross-country income disparities: di¤erences in factor endowments, barriers to technology adoption and the inappropriateness of frontier technologies to local conditions. The key components of our framework are di¤erent types of workers (skilled and unskilled labor), distortions to capital accumulation, directed technical change, costly adoption and spillovers from the world technology fron-tier. Despite its parsimonious parametrization, our empirical model provides a good t of GDP data for up to 90 countries in 1970 and 2000. We use the model to assess the relative importance of alternative factors a¤ecting the world income distribution and to perform counterfactual experiments. Our results suggests that removing barriers to technology adoption would increase output of the average OECD economy relative to the US frontier from 68.3 % to 92.5%. The average non-OECD country would instead increase from 17.4 % to 53.8%. Slashing bar-riers would also lead to higher skill premia in all countries. We also study how globalization can shape income disparities. In the absence of global IPR protec-tion, we \u85nd that trade in goods ampli\u85es income disparities, induces skill-biased technology adoption and increases skill premia in the majority of countries. These results are reverted if trade liberalization is coupled with international protection of IPR