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Tracing the adoption of digital technologies

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  • Vatsala Shreeti

Abstract

Internet-based digitalisation has ushered in a new wave of economic development in emerging markets, but persistent digital divides still exclude many from the benefits. To narrow these divides, it is important to understand the factors that shape the adoption of digital technologies. In this paper, I develop a structural model of consumer demand and supply to understand the main drivers of adoption of an essential digital technology: smartphones. Through counterfactual simulations, I quantify the role of growth in income and in income inequality, expansion of 4G network coverage, foreign entry, and improvements in device quality in shaping the smartphone market. I find that changes in the income distribution and in device quality are the most important factors driving smartphone adoption. I also provide a comparison of policies that can be used to spur smartphone adoption. I find that compared to ad valorem tax reductions and uniform subsidies, targeted subsidies are the least costly for the government and are the most effective for redistribution, being (almost) fully appropriated by consumers.

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  • Vatsala Shreeti, 2024. "Tracing the adoption of digital technologies," BIS Working Papers 1166, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1166
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    More about this item

    Keywords

    digitalisation; digital divide; technology adoption; demand estimation;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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