Technological Diffusion and Growth among Nations: the Two Stages of Catching Up

The international diffusion of technology is fundamental to an understanding of the nature of technical progress and why growth differs among advanced industrialised countries. In the present technological gap model, innovation is supposed to take place in the leading country. In countries following behind, knowledge growth depends on the spill‐over of technology from the leading country. The diffusion mechanism is first studied in a growth accounting framework. In a second step, a complete growth model is constructed in which there are two stages of catching up (falling behind). One involves closing (widening) the technological gap, the other one involves convergence (divergence) in the capital‐labour ratio.