February 2009

Based on Raj Nallari and Breda Griffith's lecture notes.

Technology Diffusion and Adoption

Technology has helped economic and social progress since the industrial revolution.  If technology is measured as total factor productivity, it explains much of the differences in both the level and rate of growth of income across countries (e.g. Hall and Jones 1999).  However, if technology is defined as scientific innovation and invention it is almost exclusively an activity of richer countries, with many developing country nationals performing research in frontiers of science in high-income countries (e.g. a large proportion of NASA and Silicon Valley engineers are foreign born).  Technological progress in rest of the world is achieved through the adoption and adaption of pre-existing but new technologies to firms and plant.  For this diffusion to accelerate, openness to trade, foreign direct investment, and domestic investments in human capital is found to be critical.  This discussion leads to the conclusion that technology is both a determinant of incomes and an outcome of rising incomes. 

Older technologies, such as fixed-line telephone, electric power, transportation, and health care services is in high use in low and middle income developing countries, and these services are usually provided by governments because of the large initial investments needed, followed by high maintenance costs and need for high-skilled engineers.  In contrast, newer technologies, such as internet, cell phones, computers etc are cheaper to adopt, easy to maintain and use.  However, technological adoption is very uneven and this creates rural-urban gap as observed in India and most developing countries.

The second global dialogue of this series focused on the impact of the global crisis on the national macro economies and on the financial systems.

Experts from from Argentina, Uruguay, Turkey, Poland, Hungary, Russia, South Africa, Indonesia, Philippines, and South Korea participated in this event. Speakers included Professor Guillermo Calvo of Columbia University, and Dr. Gerard Caprio of Williams College.

Watch the discussion.

The World Bank Institute launched at the end of last year a global dialogue series geared towards policymakers, with the goal of facilitating real time cross-country discussion on the current global economic crisis.

The first videoconference focused on the impact of the financial crisis on state and local finance. Participants from Brazil, China, India and Russia contributed via satellite.

Watch the discussion.

This week we start a new series on "Understanding Growth and Poverty". In upcoming Fridays we will be looking at issues such as technology, urbanization, corruption and others, and at how they relate with growth and poverty. As usual, based on Raj Nallari and Breda Griffith's lecture notes.

Technology and Growth

Over six decades of empirical evidence, particularly from developing countries, indicate that total factor productivity (defined as output produced per worker or per unit cost or time) with increasing returns to technology is more important for competitiveness and growth than physical capital and human capital accumulation.  However, the definition of technology varies in studies done so far, and economists are still unsure about which national policies and institutions enhance the efficiency of physical and human capital, and drive the accumulation of knowledge and use of new technologies. In this and upcoming posts we will focus on the key issue of whether the adoption of technology brings about income growth, employment and productivity.   There is some evidence to suggest that physical capital is important at early stages of development (low income countries), human capital at middle income level, and new ideas and technological inventions and innovations for advanced countries.   Does rapid technological change lead to job insecurity and job losses as a result of job skills becoming obsolete?

 Do you have an innovative idea for Climate Adaptation? Submit it to the 2009 edition of the Development Marketplace and you could win up to US$200,000 to implement it.

One hundred finalists will be announced in July 2009 and invited to Washington D.C. in November 2009 to present their ideas at the Development Marketplace and participate into knowledge exchange sessions. At the end of the competition 20-25 winners will receive up to US$200,000 in grant funding for implementation over the next two years.

The Development Marketplace is also blogging.