TY  - JOUR
AU  - Beaudry,Paul
AU  - Francois,Patrick
TI  - The Economics of Inefficient Technology Use
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13500
PY  - 2007
Y2  - October 2007
UR  - http://www.nber.org/papers/w13500
L1  - http://www.nber.org/papers/w13500.pdf
N1  - Author contact info:
Paul Beaudry
Department of Economics
University of British Columbia
997-1873 East Mall
Vancouver, B.C.
Canada,  V6T 1Z1
Tel: 604/822-8624
Fax: 604/822-5915
E-Mail: paulbe@interchange.ubc.ca

Patrick Francois
Department of Economics
University of British Columbia
Room 997-1873 East Mall
Vancouver, B.C. Canada V6T 1Z1
E-Mail: francois@interchange.ubc.ca
AB  - The adoption and diffusion of technological knowledge is generally regarded as a key element in a country's economic success. However, as is the case with most types of information, the transfer of technological knowledge is likely to be subject to adverse selection problems. In this paper we examine whether asymmetric information regarding who knows how to run a new technology efficiently can explain a set of observations regarding within and cross-country patterns of technology diffusion. In particular, we show how the dynamics of adverse selection in the market for technological knowhow can explain (1) why inefficient technology use may take over a market even when better practice is available, (2) why widespread inefficient use may persist unless a critical mass of firms switch to best practice, (3) why efficient adoption of new technologies is more likely to occur where the existing technology is already productive, where wages are already relatively high, and where the new technology is not too great an advance over the old one, and (4) why the international mobility of knowledgeable individuals does not guarantee the diffusion of best practice technology across countries.
ER  -