Market Size, Trade, and the Resistance to the Adoption of Better Technology

Klaus Desmet and Stephen Parente (parente@illinois.edu)

No 264, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: Why is the adoption of more productive technologies more fiercely resisted in some societies than in others? This paper examines the role of market size and free trade in determining whether firms or workers resist the adoption of more advanced technologies. It puts forth a model whereby the price elasticity of demand for each industry's product is an increasing function of the economy's population size. A more elastic demand lowers the resistance to technology adoption because the drop in the price of the industry's output that follows the adoption of a cost-saving technology is associated with a larger increase in industry's revenue. We demonstrate this mechanism numerically and provide empirical support for this theory.

Keywords: Technology Adoption; Resistance; Trade; Ideal Varieties (search for similar items in EconPapers)
JEL-codes: F16 O14 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ino and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:264

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