China has been growing at a high rate and has at the same time accumulated a staggering foreign surplus. We construct a theory that explains these seemingly puzzling observations, while being consistent with salient features of the Chinese growth experience since 1992: high output growth,...

We discuss a unified theory of directed technological change and technology adoption that can shed light on the causes of persistent productivity differences across countries. In our model, new technologies are designed in advanced countries and diffuse endogenously to less developed countries....