Poverty traps in a frictionless world: The effects of learning and technology assimilation

We study an endogenous growth model of technology assimilation through an adaptive learning process defining the accumulation of technological knowledge among both workers and industrial clusters. The assimilation of new technology and the arrival rate of innovations are both based on the distance from the technological frontier to the current technological development level of the country. We illustrate how, even if technological innovations become immediately available to all countries, and absent educational and institutional frictions among countries, differences in technological development levels allow for the existence of poverty traps leading to the economic stagnation of technological laggards.

Research highlights► We study an endogenous growth model of technology assimilation. ► An adaptive learning process takes place among workers and industrial clusters. ► The technological development of a country defines the arrival rate of innovations. ► Differences in technological development generate poverty traps among countries. ► Poverty traps lead to the economic stagnation of technological laggards.