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 1988). For most countries, foreign source 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. The pattern of worldwide technical change is thus determined in large part by international technology diffusion. What determines the extent of technology flows between countries and the means by which technology diffuses? This paper surveys what is known about the extent of international technology diffusion and the channels through which technology is spread. International technology diffusion is important because it determines the pace at which the world’s technology frontier may expand in the future. Do countries’ incomes converge over time or not? The answer turns on whether technology diffusion in global or local, as several widely used models show (Gene Grossman and Elhanan Helpman 1999; Peter Howitt 2000; Luis Rivera-Batiz and Paul Romer 1991). A better understanding of technical change therefore provides insights on the likelihood that certain less-developed countries will catch-up to rich countries.
