ABSTRACT
Both standard neoclassical growth theory and recent endogenous growth theory explain persistent poverty in developing countries as being partly due to differences in technology between rich and poor countries. Neoclassical theory considers technology as both universally available and applicable, and technological differences as gaps in the endowments of objects, such as factories or roads. By contrast, endogenous growth theory considers that gaps in the endowment of ideas and the limited capability of developing countries to absorb new knowledge are the main reasons for poverty. The latter implies that development policy should concentrate on the interaction between technology and skills with a view to facilitating the reduction of the idea gap.
