RN 9083 Unlocking Digital Potential: The Double-Edged Sword of Observability in Technology Adoption
Digital technologies are increasingly accessible in lower-income countries, potentially offering substantial productivity gains, but there’s a catch. They often come bundled with a level of transparency, or “observability,” that can be a double-edged sword. For example, digital payments—often the entry points to digitalization—allow business owners to track transactions more easily, which reduces moral hazard and may improve efficiency. But for employees, digital payments have mixed effects. On one hand, it reduces the hassle and risks of handling cash. On the other hand, it involves monitoring, which may reduce some employees’ ability to avoid work and lead them to resist adoption. This dilemma extends to any technology embedding observability as a byproduct, like employee-tracking softwares or mobile apps raising data privacy concerns from users, and could contribute to the “digital divide” across businesses.
Despite how common this issue is, we know little about how much this tradeoff between observability and adoption really matters. In my Job Market Paper, I study two questions:
1) How do digital technologies impact information frictions, contracting, and firm performance?
2) To what extent might these impacts hinder technology adoption by agents?
I partnered with the largest mobile money and payment provider in Senegal, Wave, to design a digital payment technology for the taxi industry and conducted two field experiments with over 2,700 taxi owners and drivers.
