Productivity differences explain a large part of the variation in incomes across countries, and technology plays a key role in determining productivity (William Easterly and Ross Levine 2001; Robert Hall and Charles Jones 1999; Edward Prescott 1998).2For most countries, foreign sources of technology account for 90 percent or more of domestic productivity growth. At present, only a handful of rich countries account for most of the world’s creation of new technology.3The pattern of worldwide technical change is thus determined in large part by international technology diffusion. 4A better understanding of technical change therefore pro-vides insights on the likelihood that certain less-developed countries will catch-up to rich countries.


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