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Volatility and slow technology diffusion

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  • Ferraro, Domenico

Abstract

I study the effects of uncertainty on technology adoption and thereby on volatility and growth. I present an analytically-tractable model in which: (i) uncertainty about the returns to adoption delays technology diffusion; and (ii) the mean and volatility of output growth are jointly determined in equilibrium. I then test the key predictions of the model by studying the introduction of three major information and communication technologies (ICTs)—computers, internet, and cell phones. I find that countries with more volatile growth rates of real GDP per capita have higher time adoption lags and lower average growth, as predicted by the model.

Suggested Citation

  • Ferraro, Domenico, 2017. "Volatility and slow technology diffusion," European Economic Review, Elsevier, vol. 96(C), pages 18-37.
  • Handle: RePEc:eee:eecrev:v:96:y:2017:i:c:p:18-37
    DOI: 10.1016/j.euroecorev.2017.04.005
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    More about this item

    Keywords

    Uncertainty; Volatility; Technology adoption; Economic growth; Real options;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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