Much recent work has suggested that endogenous technological change tends to reinforce the position of the leading nations. Yet from time to time this leadership role shifts. We suggest a mechanism that explains this pattern of -leapfrogging- as a response to occasional major changes in technology. When such a change occurs, leading nations may have no incentive to adopt the new ideas; given their extensive experience with older technologies, the new ideas do not initially seem to be an improvement. Lagging nations, however, have less experience; the new techniques offer them an opportunity to use their lower wages, to break into the market. If the new techniques eventually prove to be more productive than the old, there is a reversal of leadership.
*Published:
American Economic Review, Vol. 83 (1993).
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