Technology Adoption in Input-Output Networks

Xingtong Han and Lei Xu

Staff Working Papers from Bank of Canada

Abstract: We study how input-output networks affect the speed of technology adoption. In particular, we model the decision to adopt the programming language Python 3 by software packages. Python 3 provides advanced features but is not backward compatible with Python 2, which implies it comes with adoption costs. Moreover, packages are dependent on other packages, meaning one package’s adoption decision is affected by the adoption decisions of other packages because many packages are linked to each other. We build a dynamic model of technology adoption that incorporates an input-output network and estimate it using a complete dataset of Python packages. We are among the first to link the literature of dynamic discrete choice models to network analysis. We also contribute to the literature on technology adoption by showing the adverse effects that input-output networks can have on how technology is adopted in a dynamic setting. We show that a package’s adoption decision is significantly affected by the adoption decisions of its dependency packages. We conduct counterfactual analyses of cost subsidies that target a community level and show that network structure is crucial to determining an optimal policy of cost subsidy.

Keywords: Economic models; Firm dynamics; Productivity (search for similar items in EconPapers)
JEL-codes: C61 L23 L86 O14 O33 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2019-12
New Economics Papers: this item is included in nep-com, nep-hme, nep-net and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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