The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper extends Grossman and Helpman’s seminal work (1991), and presents an endogenous growth model where innovations created in a high-tech sector may be assimilated or adapted by a low-tech sector. Applying a simple Heckscher-Ohlin framework, the effects of technological diffusion are found to allow a country relatively scarce in human capital to benefit from nondecreasing rates of growth through its low-tech sector. The model is tested by using a dynamic panel data approach (Arellano and Bover, 1995). Results are consistent with the predictions of the model and robust to a broad range of definitions of technological intensity.