Lexical Distance and the Diffusion of Technology

This research shows that linguistic differences can obstruct the diffusion of technology and contribute to disparities in living standards between countries. I use a new measure of lexical similarity known as the normalized Levenshtein distance to show that lexical distances closely track bilateral differences in the adoption intensities of various economically important technologies. This relationship manifests across technologies in the transportation, information technology, steel, telecommunications, and health sectors. I then show that this variation in the intensity of technology adoption has important ramifications for aggregate living standards, as greater linguistic distances are also associated with larger bilateral gaps in GDP per capita. A plausible channel for these effects is via trade. These results hold among higher but not low-income nations, likely because linguistic differences constitute a binding constraint on technology transfer only once a threshold level of development is surpassed