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.
Original language | English (US) |
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Pages (from-to) | 18-37 |
Number of pages | 20 |
Journal | European Economic Review |
Volume | 96 |
DOIs | |
State | Published - Jul 1 2017 |
Keywords
- Economic growth
- Real options
- Technology adoption
- Uncertainty
- Volatility
ASJC Scopus subject areas
- Finance
- Economics and Econometrics