Andrew Burns World Bank November 18, 2008November 18, 2008 Title Microsoft PowerPoint - S2 - Burns.ppt [Compatibility Mode] Author Renaud_I Created Date 11/19/2008 5:30:19 PM ...

Technology diffusion in the developing world

Andrew Burns

World Bank

November 18, 2008

About this study

Broad definition of technology: comprises machines, techniques (including business processes) and eventechniques (including business processes), and even market knowledge

N t b t t h l ’ t ib ti t thNot about technology’s contribution to growth

Not about total factor productivityp y

About understanding better the diffusion of technology across and within developing countries and recentacross and within developing countries and recent trends in the determinants of that diffusion

Technology in the developing world

Globalization and better policies have enabled developing countries to narrow the technology divide with high incomecountries to narrow the technology divide with high income countries – but the gap remains large

Progress in de eloping co ntries depends mainl onProgress in developing countries depends mainly on absorbing and adapting foreign technologies – rather than at-the-frontier innovations

Persistent weakness in technological absorptive capacity may increasingly constrain developing-countrymay increasingly constrain developing country technological progress

A framework for understanding technological g gprogress in developing countries

Exposure to technological TradeTrade FDIFDI

Contact Contact with with

Contact Contact with with technological

frontier

Domestic

DiasporaDiaspora AcademiaAcademia

technological asborptive capacity

Yields technological progress

Technology in the developing country

p g

Spread of t h l ithi In-country diffusiontechnology within country is key

Measuring technological achievement

Index based on 20 sub-indicators along 4 dimensions

1. Scientific innovation and invention2. Penetration of older technologies3 P t ti f t t h l i3. Penetration of recent technologies4. Exposure to foreign technologies

A flexible data-driven weighting scheme (principal components) used to calculate summary indices of each dimension and an overall index

Developing countries are intensive consumers of foreign inputs but do little at-the-frontier innovation

Sub-indexes of technological achievement (2000s), high-income countries=100

120

140Sub indexes of technological achievement (2000s), high income countries 100

80

100

40

60

0

20

40

0Scientificinvention

Oldertechnologies

Newtechnologies

Foreign inputs

High-income Upper-middle-income Lower-middle income Low income

Although closing, the gap remains large

120

Index of technological achievement, index high-income countries = 100

80

100

60

80

20

40

0High Income Upper Middle Lower Middle Low Income

Income Income

Although closing, the gap remains large

120

Index of technological achievement, index high-income countries = 100

80

100 1990s2000s

60

80

20

40

0High Income Upper Middle Lower Middle Low Income

Income Income

Technology in the developing world

Globalization and better policies have enabled developing countries to narrow the technology divide with high incomecountries to narrow the technology divide with high income countries – but the gap remains large

Progress in de eloping co ntries depends mainl onProgress in developing countries depends mainly on absorbing and adapting foreign technologies – rather than at-the-frontier innovations

Persistent weakness in technological absorptive capacity may increasingly constrain developing-countrymay increasingly constrain developing country technological progress

Developing countries exposure to foreign p g p gtechnology has increased enormously

7

81994-96

Imports of high-tech goods (% of GDP)

5

6

7 2002-04

2

3

4

0

1

2

High income Upper middleincome

Lower middleincome

Low income

Technology spreads to developing countries relatively rapidly, but is much slower to y p y,spread within these countries

Level of penetration of new technologies (% of global maximum)

50%

25%

5%

0 20 40 60 80 100Percent of technology country pairsPercent of technology-country pairs reaching given penetration level

Witness telephone pentration rates in India

60Subscribers per 100 persons

40

50

20

30 Urban subscribers

Rural subscribers

10

20

01998 1999 2000 2001 2002 2003 2004 2005 2006 2007*

* 2007 data are for June 2007Source: Telecommunications Regulatory Authority of India

Technology in the developing world

Globalization and better policies have enabled developing countries to narrow the technology divide with high incomecountries to narrow the technology divide with high income countries – but the gap remains large

Progress in de eloping co ntries depends mainl onProgress in developing countries depends mainly on absorbing and adapting foreign technologies – rather than at-the-frontier innovations

Persistent weakness in technological absorptive capacity may increasingly constrain developing-countrymay increasingly constrain developing country technological progress

Overall technological absorptive capacity has g p p yimproved much less rapidly than achievement

I d f l ti i t i i d hi h i t i 100

200

Index of relative improvement in index, high-income countries=100

140160180

80100120

204060

0Achievement Absorptive capacity

High income Upper middle income Lower middle Low incomeHigh income Upper-middle income Lower-middle Low-income

Progress in absorptive capacity

Substantial improvementsSubstantial improvements1. Macroeconomic environment2 Financial structure and intermediation2. Financial structure and intermediation

Relatively weak improvementsy p1. Basic and advanced technological literacy 2. Regulatory environment and governance

Despite high enrolment rates, few students p g ,pass standardized tests (2000s)

100EnrolmentM t t d d

Sixth graders Fourth graders% of relevant population

80

Meet standard

40

60

20

0SouthAfrica

Uganda Namibia Malawi Turkey Argentina Colombia Morocco

Sources: SACMEQ II (2000), PIRLS (2001), and DHS

Weak Absorptive capacity may begin to t i f th t h l i l

Technological achievement versus per capita income by region

constrain further technological progress

0.18

0.2

Technological achievement versus per capita income by region

0 12

0.14

0.16

0.08

0.1

0.12

0 02

0.04

0.06

0

0.02

0 5000 10000 15000 20000 25000 30000 35000 40000

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanEast Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan Africa

High income OECD High income Other All

Weak Absorptive capacity may begin to t i f th t h l i l

Technological achievement versus per capita income by region

constrain further technological progress

0.18

0.2

Technological achievement versus per capita income by region

0 12

0.14

0.16 All countries

0.08

0.1

0.12

0 02

0.04

0.06

0

0.02

0 5000 10000 15000 20000 25000 30000 35000 40000

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanEast Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan AfricaHigh income OECD High income Other AllLog. (All)

Weak Absorptive capacity may begin to t i f th t h l i l

Technological achievement versus per capita income by region

constrain further technological progress

0.18

0.2

Technological achievement versus per capita income by region

0 12

0.14

0.16 All countries

0.08

0.1

0.12

Latin America

0 02

0.04

0.06

0

0.02

0 5000 10000 15000 20000 25000 30000 35000 40000

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanEast Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan AfricaHigh income OECD High income Other AllLog. (All) Log. (Latin America & Caribbean)

Weak Absorptive capacity may begin to t i f th t h l i l

Technological achievement versus per capita income by region

constrain further technological progress

0.18

0.2

Technological achievement versus per capita income by region

E & C t l A i

0 12

0.14

0.16 Europe & Central AsiaAll countries

0.08

0.1

0.12

Latin America

0 02

0.04

0.06

0

0.02

0 5000 10000 15000 20000 25000 30000 35000 40000

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanEast Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan AfricaHigh income OECD High income Other AllLog. (All) Log. (Latin America & Caribbean) Log. (Europe & Central Asia)

Key features of a pro-technology policy stance

Strengthen basic technological competencies

Improve basic infrastructure (roads, electricity, telephony)

Pay attention to the entire economy not just major centersPay attention to the entire economy not just major centers

Emphasize technology diffusion by reinforcing dissemination systems and the market-orientation of R&Ddissemination systems and the market orientation of R&D programs

Further improve the investment climate so as to allowFurther improve the investment climate so as to allow innovative firms to grow and flourish

Technology diffusion in the developing world

Andrew BurnsAndrew Burns

World Bank

November 18, 2008