Productivity differences

Many technologies used by the LDCs are developed in the OECD economies and are designed to make optimal use of the skills of these richer countries' w orkforces. Differences in the supply of skills create a mismatch between th e requirements of these technologies and the skills of LDC workers, and lea d to low productivity in the LDCs. Even when all countries have equal acces s to new technologies, this technology-skill mismatch can lead to sizable d ifferences in total factor productivity and output per worker. We provide e vidence in favor of the cross-industry productivity patterns predicted by o ur model, and also show that technology-skill mismatch could account for a large fraction of the observed output per worker differences in the data.