Volatility and Slow Technology Diffusion

I study the effects of uncertainty on technology adoption and thereby on volatility and growth. I present an analytically-tractable model in which: (i) uncertainty about the returns to adoption delays technology diffusion; and (ii) the mean and volatility of output growth are jointly determined in equilibrium. I then test the key predictions of the model by studying the introduction of three major information and communication technologies (ICTs) - computers, internet, and cell phones. I find that countries with more volatile growth rates of real GDP per capita have higher time adoption lags and lower average growth, as predicted by the model