Technology-Skill Complementarity And International TFP Differences

What determines whether a country is better at using some technologies than others? A widely held view is that a country's ability to absorb and implement technologies is tied to its human capital. In this paper, the authors construct a novel specification of technology that incorporates this idea. Countries are comprised of a range of industries with heterogeneous productivities. In high human capital countries, productivity is maximized for industries with the most sophisticated technologies, while in low human capital countries; productivity is maximized for industries with less sophisticated technologies.