Insecurity and Ownership Disputes as Barriers to Technology Diffusion

This paper examines both the desirability and feasibility of technology transfers in a setting where institutions governing the security of output or income are imperfect. Based on a guns-versus-butter model involving two countries (a technology leader and a technology laggard), our analysis characterizes the dependence of equilibrium technology transfers on the initial technological distance between them and the degree of output security for two types of technology: a general-purpose technology and a sector-specific technology. For both types, the analysis unveils the possible emergence of a “low-technology trap,” conditioned on the degree of output security and the laggard’s capacity to absorb state-of-the-art technologies. However, who blocks the transfer depends on the type of technology considered