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Financial Development and the Diffusion of Technologies under Uncertainty in Africa

Using novel measures of technology diffusion and adoption developed by Comin and Hobijn (2012), we examine the role of finance in the timing of adoption and the diffusion of thirteen sectoral technologies in 44 Sub-Saharan Africa countries. These technologies cover sectors such as agriculture, communication and information technology, industry, and transport. The results show that financial development enhances the timing and diffusion of technologies both directly, and indirectly, through reducing the risk associated with new technologies. However, the results differ across technologies, with the information and communication technologies showing more responsiveness to changes in financial development. There is also evidence to suggest that, subject to the level of economic development, some technologies diffusion faster, while others diffuse slower. The latter result implies that some sector-specific technologies may diffuse quicker in less developed economies, and thus economic theory needs to be extended to account for this technology-specific feature

Working paper 472
1 October 2014
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