Monday, 3 November 2008

Macroeconomic determinants of technology diffusion

I am looking at the macroeconomic determinants - things like education and international factors - that influence the spread of technology to a country. There are indications from other people's and my own work that technology diffusion is as important for growth in developing countries as capital or educational accumulation.

I set up a preliminary model by looking for available macroeconomic proxies for likely determinants of transfer to a country, whether microeconomic or macroeconomic in origin. Here are some candidates:

- Lags in technology per capita in a leading technology country
- Lags in technology per capita in the country itself
- Lags in telephones or other reference technology per capita
- Lags in saving per capita
- Lags in education per capita
- First lag in GDP per capita
- First lag in interest rates
- First lag in openness
- First lag in government size
- Population

The first five variables may be lagged many times, so as to capture the effect of experience and exposure to the technology. Finding a decent panel data estimation method for multiple lags might be a problem however. A multiply lagged equation can be brought into the form of a first order AR(1) autoregression, and then vector versions of the main GMM estimators applied to it, but the conditions will be very stringent.

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