Technology diffusion and uneven development

Abstract

We propose a conceptualisation of the process of technology adoption that takes into account the uneven relative costs of technology implementation, especially country differences in wage levels. The novelties and contributions of our approach are the following. First, we introduce a dynamic macroeconomic model of technology diffusion, which is the first to directly account for the difference in factor cost proportions in an endogenous cross-country setting. Second, we utilise the Cross-country Historical Adoption of Technology (CHAT) and Penn World Table databases to calibrate the model using non-linear approximation across countries and technologies, which explains about 50% of the variability in technology density. Third, the results of the calibrated model offer a new insight into the dynamics and patterns of technology diffusion of differently developed countries, offering both an approximation of the average technology adoption across differently developed countries over time and an approximation of the relative technology density adoption curves, which are country specific generalisations of the logistic curves and depend highly on the general level of development and wage levels.