Trade Liberalization, Democratization and Technology Adoption

We study the role of trade liberalization, democratization and their interaction for technology adoption. A general equilibrium theory with heterogeneous skills predicts a complementarity between trade and political regimes. Openness should accelerate technology adoption if coupled with democratization but may lead to a slowdown if these regime changes are imbalanced. We use panel data on technology adoption at the sectoral level for the period 1980-2000. We exploit within country variation and the heterogenous timing of openness and democratization. The results document the existence of a positive interaction between these institutional changes for technology adoption.