Technology diffusion in the developing world Uri Dadush Mick Riordan World Bank January, 2008.

Technology diffusion in the

developing world

Uri Dadush

Mick Riordan

World BankJanuary, 2008

A broad definition of technology

Includes the introduction of “new-to-the market” and “new-to-the-firm” techniques

Comprises:– machines– techniques (including business processes)– even market knowledge– seemingly simple technologies – such as

irrigation

Wide gaps persist in the use of many technologies in 2004

0

20

40

60

80

100

Patents Ruralsanitation

Tractors Mobilephones

Timelydelivery

Source: World Bank, Global Economic Prospects (2008)

Indexes, high-income countries=100

High-income

Upper-middle

Lower-middle

Low-income

Measured across several dimensions

1. Scientific innovation and invention Patents, journal articles

2. Penetration of older technologies Electrification Fixed-line telephones Sanitation Immunizations

3. Penetration of newer technologies Computers Mobile telephones Internet users Mexico: U-V filtered drinking

water systemLaos: Inexpensive solar power

solutionsIndia: Internet-enabled

village kiosk

Technology in the developing world

The technology gap between rich and poor countries has narrowed -- but remains large

Progress in developing countries reflects the absorption of pre-existing technologies – not at-the-frontier inventions

Globalization has been a main driver of technological progress

Low technical literacy, uneven distribution of older technologies and low rural penetration rates limit absorptive capacity

Persistent weakness in technological absorptive capacity may constrain further technological progress

0

1

2

3

4

5

6

7

8

East Asia &Pacific

Europe &Central Asia*

Latin America& Caribbean

Middle-East &North Africa

South Asia Sub-SaharanAfrica

Technological progress is at the heart of income growth and poverty reduction

Source: World Bank, Poncet 2006

* Data for Europe & Central Asia cover period 2005/1995

Average annual per capita income and total factor productivity growth,1990-2005

Per capita income growth

TFP growth

Technological progress in developing countries has outpaced high-income countries

0

20

40

60

80

100

120

140

160

180

High Income Upper MiddleIncome

Lower MiddleIncome

Low Income

Percent change in technological achievement, 2000s vs 1990s

Source: World Bank

Technology gap: narrowing but still wide

0

20

40

60

80

100

120

High Income Upper MiddleIncome

Lower MiddleIncome

Low Income

Index of technological achievement

Source: World Bank

1990s

2000s

How the indexes were calculated

All data were scaled (divided by GDP, population or area as appropriate) to ensure comparability

Scaled data were averaged for each of two periods (1990-3 and 2000-3) to minimize impact of outliers

All variables converted into an index bound between zero and one by applying subtracting from each observation the minimum value observed over the two time periods and dividing by the difference between the maximum and minimum

Variables were converted to have same standard deviation and zero mean

Data set shown to have ywo or three principal components.

Data was segmented into economically sensible technology dimensions, each of which had one associated principal component. Variables in each dimensions were aggregated using weights from the principal components.

The four sub-indices were then aggregated using the first principal components of the reduced data set.

)min()max(

)min(

XX

Xxij





Low levels of human capital, uneven distribution of older technologies and low rural penetration rates are important weaknesses


Developing countries are scarcely active at the global technology frontier

0

20

40

60

80

100

High-income Upper-middle-income

Lower-middleincome

Low income

Intensity of imported technologies summary index (2000s), high-income countries=100


Increased penetration of older technologies drives the rise in technological achievement in developing countries

0

100

200

300

400

500

600

Scientific innovation Older technologies Recent technologies

High-income Upper-middle Lower-middle Low income

Increase in summary index, relative to high-income increase=100






Low levels of human capital, uneven distribution of older technologies and low rural penetration rates are important weaknesses


Technology diffusion depends on exposure to foreign technology and absorptive capacity


Substantial increases in market openness have stimulated technology transfer

0

2

4

6

8

10

1994 1997 2000 2003

High-tech Imports (% of GDP)

Source: CEPII, BACI database; World Development Indicators

0

1

2

3

4

5

1990 1993 1996 1999 2002 2005

FDI (% of GDP)

Low income

Upper-middle

Low income

Lower-middle

Upper-middle

Lower-middle

Highly-skilled migrant populations facilitate technology transfer

0

0.5

1

1.5

2

2.5

1990 1995 2000 2005

Developing country remittances(% of GDP)

Source: www.worldbank.org/prospects/migrationandremittances.

0%

2%

4%

6%

8%

10%

12%

East A

sia &

Pac

ific

Europ

e & C

entra

l Asia

Latin

Am

erica

& C

aribb

ean

Midd

le Eas

t & N

orth

Afri

ca

South

Asia

Sub-S

ahar

an A

frica

Size of diaspora (% of origin-country population)







Most developing countries exploit recent technologies at relatively low levels

% of developing countries using technology at indicated level of intensity

Source: World Bank using data from Comin & Hobihn (2004)

0

10

20

30

40

50

60

70

80

90

0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50 50+

Intensity of recent technology usage as a percent of global maximum

High-income countries

Developing countries

Low diffusion in rural areas restrains overall technological achievement

0

10

20

30

40

50

60

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*

Subscribers per 100 persons

Urban subscribers

Rural subscribers

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

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

0

20

40

60

80

100

SouthAfrica

Uganda Namibia Malawi Turkey Argentina Colombia Morocco

Enrolment

Meet standard

Sixth graders Fourth graders

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

% of relevant population







Progress in absorptive capacity

Substantial improvements1. Macroeconomic environment2. Financial structure and intermediation

Relatively weak improvements1. Basic and advanced technological literacy 2. Regulatory environment and governance

Technological absorptive capacity has improved relatively slowly

8

8.5

9

9.5

10

Absorptive capacity

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

Percent increase in technological achievement and absorptive capacity, 1990s to 2000s


Technology converges toward a level determined by absorptive capacity not the global frontier

By early 1990s endogenous growth theory (Barro, 1991; Casselli et al., 1996) sought to explain lack of income convergence by arguing that domestic institutions (e.g. education, competition policy, regulations etc.) determined the level of income to which countries converged

Hall and Jones (1998), Frankel and Romer (1999) Acemoglu, Easterly and Leine 2003, Rodrik et al. 2002) provided empirical support.

Same basic logic has been applied to technology Lederman & Saenz (2005)

0

1

2

3

4

5

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

0 5000 10000 15000 20000 25000 30000 35000 40000

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

Technological achievement versus per capita income by region (early 2000s)

Weak Absorptive capacity may begin to constrain further technological progress

All countries


0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

0 5000 10000 15000 20000 25000 30000 35000 40000

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


All countriesEurope & Central Asia



0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

0 5000 10000 15000 20000 25000 30000 35000 40000

East 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)


All countries

Latin America & Caribbean

Europe & Central Asia



Key features of a pro-technology policy stance

No detailed roadmap for promoting technological progress, but certain policy directions are indicated:

– Maintain openness to trade, foreign direct investment and participation of diaspora

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

– Improve basic infrastructure (roads, electricity, telephony)

– Raise the quality and quantity of education throughout economy not just major centers

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

Technology diffusion in the

developing world

Hans Timmer

Andrew Burns

World BankJanuary, 2008

Technology diffusion in the developing world Uri Dadush Mick Riordan World Bank January, 2008.

Documents

technological progress

world bank slide

developing countries

technology gap

technology diffusion

irrigation slide

foreign technology

poor countries