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