Vintage capital, distortions and development

Abstract

This paper asks to what extent distortions to the adoption of new technology cause income inequality across nations. We work in the framework of embodied technological progress with an individual, C.E.S. production function. We estimate the parameters of this production function from international data and calibrate the model, using U.S. National Income statistics. Our analysis suggests that distortions account for a bigger portion of income inequality than hitherto has been assessed.