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Working Paper
Two-sided Market, R&D and Payments System Evolution
It takes many years for more efficient electronic payments to be widely used, and the fees that merchants (consumers) pay for using those services are increasing (decreasing) over time. We address these puzzles by studying payments system evolution with a dynamic model in a two-sided market setting. We calibrate the model to the U.S. payment card data, and conduct welfare and policy analysis. Our analysis shows that the market power of electronic payment networks plays important roles in explaining the slow adoption and asymmetric price changes, and the welfare impact of regulations may vary ...
Working Paper
Technology adoption and mortality
We develop a quantitative theory of mortality trends and population dynamics. In our theory, individuals incur time and/or goods costs over their life cycle, to adopt a better health technology that increases their age-specific survival probability. Technology adoption is a source of a dynamic externality: As more individuals adopt the better technology, the marginal benefit of future adoption increases. The allocation of time and/or goods also depends on total factor productivity (TFP): As TFP grows, more resources are allocated to technology adoption. Both channels---the dynamic externality ...
Working Paper
Technology adoption, mortality and population dynamics
We develop a quantitative theory of mortality trends and population dynamics. Our theory emphasizes individual choices on costly adoption of healthy technologies and diffusion of knowledge about infections as a key channel for reducing mortality. Our theory is consistent with three observations on mortality: (i) The cross-country correlation between levels of mortality and income is negative; (ii) mortality in poor countries has converged to that of rich countries despite no convergence in income; and (iii) economic growth is not a prerequisite for mortality to decline. We calibrate our model ...
Working Paper
The Effect of Vehicle Fuel Economy Standards on Technology Adoption
Many countries are tightening passenger vehicle fuel economy standards. The literature on passenger vehicle standards has used structural models to estimate their welfare effects. This paper provides the first empirical evidence on the effects of recently tightened fuel economy standards on technology adoption. Specifically, it investigates changes in the rate and direction of technology adoption, that is, the extent to which technology is used to increase fuel economy at the expense of other vehicle attributes. We find that recent U.S. and European standards have both increased the rate of ...
Working Paper
Innovation, Diffusion, and Trade: Theory and Measurement
I develop a multicountry-model in which economic growth is driven mainly by domestic innovation and the adoption of foreign technologies embodied in traded intermediate goods. Fitting the model to data on innovation, output per capita, and trade in varieties for the period 1996-2007, I estimate the costs of both domestic innovation and adopting foreign innovations, and then decompose the sources of economic growth around the world. I find that the adoption channel has been especially important in developing countries, and accounts for about 65% of their ?embodied? growth. Developed countries ...
Briefing
Innovation, Diffusion and Intellectual Property Rights
Our recent working paper studies innovation and diffusion of technology along an industry's evolution and characterizes how diffusion affects the incentives to innovate. In our analysis, firms participate in a competitive industry and face production capacity constraints. The entry of imitators thus increases industry supply and is socially beneficial to a degree. We show that, from the social welfare point of view, innovators should be compensated for intellectual property rights to internalize their knowledge spillovers to imitators. However, such compensation should be only partial due to ...
Working Paper
The Adoption of Non-Rival Inputs and Firm Scope
Custom software is distinct from other types of capital in that it is non-rival---once a firm makes an investment in custom software, it can be used simultaneously across its many establishments. Using confidential US Census data, we document that while firms with more establishments are more likely to invest in custom software, they spend less on it as a share of total capital expenditure. We explain these empirical patterns by developing a model that incorporates the non-rivalry of custom software. In the model, firms choose whether to adopt custom software, the intensity of their ...
Working Paper
The Adoption of Non-Rival Inputs and Firm Scope
Custom software is distinct from other types of capital in that it is non-rival---once a firm makes an investment in custom software, it can be used simultaneously across its many establishments. Using confidential US Census data, we document that while firms with more establishments are more likely to invest in custom software, they spend less on it as a share of total capital expenditure. We explain these empirical patterns by developing a model that incorporates the non-rivalry of custom software. In the model, firms choose whether to adopt custom software, the intensity of their ...
Working Paper
The Geography of Business Dynamism and Skill Biased Technical Change
This paper shows that the growing regional disparities in the U.S. since 1980 can be explained by firms endogenously responding to a skill-biased technology shock. With the introduction of a new skill-biased technology that is high fixed cost but low marginal cost, firms endogenously adopt more in big cities, cities that offer abundant amenities for high-skilled workers, and cities that are more productive in using high-skilled labor. In cities with more adoption, small and unproductive firms are more likely to exit the market, increasing the equilibrium rate of turnover or business ...