Knowldege Economics, Catch up and Technology Diffusion: from digital divide to digital provide?

Xavier GaliègueLaboratoire d’Economie d’Orléans

University of OrléansFrance

Bicocca University,Milano, May 30th 2014

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of the Loire Valley

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Molière (1622-1673)

Charles Perrault (1628-1703) And the famous Voltaire who had a stay here…

In 2006, The University of Orleans celebrated the 700th

anniversary of its 1306 founding.

The UO campus today

The Campus is situated in the heart the “Loire Valley-UNESCO” in hundreds of hectares of forest

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The University of Orléans

Knowldege Economics, Catch up and Technology Diffusion: from digital divide to digital provide?

Xavier GaliègueLaboratoire d’Economie d’Orléans

University of OrléansFrance

Bicocca University,Milano, May 30th 2014

The economic convergence process has been studied for a long time, from Gerschenkron to Abramowitz and Lee.

This process combine « institutional arrangements » with voluntary policies…

Which need a mix of  social and technical capabilities ( Gerschenkron)

And can lead to accelerated evolutions (leapfrogging strategies) as to development traps ( the middle income trap)

And this process can be slowed or accelarated by the development of Information and communications Technologies (digital divide or provide)

I Some Stylized facts about Technology diffusion

A recent and fast catch up process…

With still huge productivity gaps

.. Moreover the productivity distribution all over the world is now bimodal

With a long term convergence

Industrialized Countries still dominate developing countries in scientific innovation and Invention…

.. But less in terms of recent and older technologies penetration

II Catch up process and World Techological Frontier

Research on the world Technological Frontier assumes that the farther a country from this frontier, the higher is its speed of convergence towards this frontier.This result fits well with the working of the neoclassical Solow growth modelLiterature in economic history learned that this convergence process involved at first a limited number of countries, then a growing number of countries

Namely, at first Great Britain and Germany (Gerschenkron),Then Europe, USA, and Japan ( Abramowitz)And now South East Asia, China, India (Lee).

The ability of each country to implement such a convergenceprocess depends on a complete set of capabilities, policies and external factors which helps the economy to have an domestic Technological absorption capacity.

Some reflexions using Production Efficiency model.

These models are used to measure the contribution of technological adoption and of production factor allowances in the convergence process

The interest of these models: Measure the explanation of an income gap..

Due to a technical inefficiency (gap between A and B): Distance to the frontierDue to techological change (gap between B and E): “pure” technological ProgressDue to an increase in the capital intensity (gap between B and C): “capital deepening” effect.

Some Results

- On the world Economic Frontier 1990 (Kumar et Russel, 2002)

- Huge gaps with the frontier, not correlated with the capital intensity

A comparison of technological Frontiers, 1965-90

- Technological progress effect is the most important for industrialized countries- Capital deepening effect is very important for developing countries.-Some efficiency gains for developing countries, -for a limited number of countries

III Some recent results on the ICT adpatation in developing countries

The effect of mobile phone introduction on the fish MarketIn the Kerala Stae, India (Jensen, 2007)

Before Mobile Phone Introduction:

The fish markets were not linked, as fisherman were most of the time on their boats. So they can’t take account of price disparities on the different markets.These price disparities were linked to high transport costs, and to the impossibility of fish storage So Fisherman could deliver their catch only on one market Résults: inefficient markets, with large price disparities, and excess supply or demand

Mobile Phone Introduction took 3 years, from 1997 to 2000, with a coverage of 20 Km in the see.It enables fishermen to have a better knowledge of the state of the nearest markets of their boat

After mobile phone introduction..-A third of fishermen sold their catch on a different market from their own port-Price dispersion decrease from de 60-70% to less than 15%-Unsold Fish thrown back to sea disappeared

Fisherman income rises of 8%, while market price decrease of 4%.

Some limits and other results:

- A persistant digital divide between cities and rural areas

Some experiences tried to reduce this digital provide, like Internet assistance in remote village in India (program «E-Choupal» (www.itcportal.com))

Another experience : the DrumNet program in Kenya

This program help african group of small producers to export their product using their Mobile phone

This experience has been a half success (or failure) , according to a study made for the World Bank (Ashraf, Giné, Kalan, 2008)

On one hand Drum net improved the situation of farmers, mainly of middle size farms which had no access to the export market…

On the other hand it makes farmers more dependant from the export market, and after some time they decide to come back to their domestic market, less profitable but more sure, still using Drum net Services…

Others experiences in agriculture, fisheries, retail trade, health and even payment proves that ITC are now better adapted to developing countries and will help a key factor in their catch up strategy