Monday, 13 July 2009

The different effects of advanced technology in high and low income countries

A country's output depends on the equipment it uses to produce it, and most equipment works better when it is used by trained personnel, is regularly maintained, and has readily available spare parts. The idea occurs frequently in macroeconomics in the form of technology being specific to a certain set of country characteristics, and has attracted theoretical and empirical support.

Here are some regressions I ran earlier on a model

Output = Constant * capital^a * education^b * technology^c * error

The regressions show the different effects on output of telephones and computers in rich and poor countries. Rich countries might provide much more supportive conditions for operation of these technologies, and so have higher estimates of the coefficient c. So it turned out:

As a moral: advanced technology may become more beneficial to developing countries as they get richer. Early on in development, it may seem that advanced technologies are bringing little benefit.

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