Technology in emerging economies

So how well are emerging economies using new technology, really? Hitherto, judgments have had to be based largely on anecdotes. Now the World Bank has supplemented the snapshot evidence with more comprehensive measures.

Take-off to tomorrow, and to yesterday
The bank has drawn up indices based on the usual array of numbers: computers and mobile phones per head, patents and scientific papers published; imports of high-tech and capital goods. In addition, it uses things such as the number of hours of electricity per day and airline take-offs to capture the absorption of 19th- and 20th-century technologies. It tops this off with measures of educational standards and financial structure, which show whether technology companies can get qualified workers and enough capital. The results, laid out last month in the bank’s annual Global Economic Prospects report, measure technological progress in its broadest sense: as the spread of ideas, techniques and new forms of business organisation.

Technology so defined is fundamental to economic advance. Without it, growth would be limited to the contributions of increases in the size of the labour force and the capital stock. With it, labour and capital can be used and combined far more effectively. So it is good news that the bank finds that the use of modern technology in emerging economies is coming on in leaps and bounds.

Between the early 1990s and the early 2000s, the index that summarises the indicators rose by 160% in poor countries (with incomes per person of less than about $900 a year at current exchange rates) and by 100% in middle-income ones ($900-11,000). The index went up by only 77% in industrialised countries (with average incomes above $11,000), where technology was more advanced to start with. Poor and middle-income nations, the bank concludes, are catching up with the West.

The main channels through which technology is diffused in emerging economies are foreign trade (buying equipment and new ideas directly); foreign investment (having foreign firms bring them to you); and emigrants in the West, who keep families and firms in their countries of origin abreast of new ideas. All are going great guns.

Of internet cafés and power cuts,” The Economist, February 9, 2008

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