DP9208 The Spatial Diffusion of Technology

Author(s): Diego Comin, Mikhail Dmitriev, Esteban Rossi-Hansberg
Publication Date: November 2012
Keyword(s): Geography, Human Interactions, Technology Diffusion
JEL(s): O3, R0
Programme Areas: International Macroeconomics, International Trade and Regional Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9208

We study empirically technology diffusion across countries and over time. We find significant evidence that technology diffuses slower to locations that are farther away from adoption leaders. This effect is stronger across rich countries and also when measuring distance along the south-north dimension. A simple theory of human interactions can account for these empirical findings. The theory suggests that the effect of distance should vanish over time, a hypothesis that we confirm in the data, and that distinguishes technology from other flows like goods or investments. We then structurally estimate the model. The parameter governing the frequency of interactions is larger for newer and network-based technologies and for the median technology the frequency of interactions decays by 73% every 1000 Kms. Overall, we document the significant role that geography plays in determining technology diffusion across countries.