Technology adoption, convergence, and divergence

A new mechanism to explain simultaneous convergence among industrialized countries and divergence between these countries and the rest of the world is presented. Specifically, the adoption of technologies, as embodied in machines, is examined in the context of a world in which capital goods are produced in a few centers and then exported. Since the local cost of introducing machines varies from region to region, technology is not adopted everywhere, and when it is adopted, its intensity varies from place to place. Technological progress diminishes the differences within the group of countries that adopt technologies but increases the gap between those countries and the rest of the world. The model is applied to cases of investment costs generated by deficient institutions and to transport costs. Its predictions are supported by recent research.