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Volatility and slow technology diffusion

Domenico Ferraro

European Economic Review, 2017, vol. 96, issue C, 18-37

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.

Keywords: Uncertainty; Volatility; Technology adoption; Economic growth; Real options (search for similar items in EconPapers)
JEL-codes: E32 O30 O33 O40 O57 (search for similar items in EconPapers)
Date: 2017
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