Social structure and consumption: on the diffusion of consumer good innovation

This paper presents a simple evolutionary model to study the diffusion patterns of product innovations for consumer goods. Following a Veblenian theme, we interpret consumption as a social activity constrained by social norms and class structure. Societies that allow for more behavioral variety will experience faster adoption of new consumer goods. We also find that the speed of diffusion as well as the saturation levels reached depend greatly on the structure of a society. Combining these two effects, we conclude that a social structure displaying behavioral variety and an even class structure fares better than any other social set-up in terms of the speed of adoption of product innovations and product variety. JEL Classification: D11, O31 This paper has benefited from comments by Robin Cowan and seminar participants at the University of Economics in Vienna, the Maastricht Economic Research Institute on Innovation and Technology (MERIT), University of Maastricht, participants of the EMAEE 2003 Conference in Augsburg, Germany as well as the Schumpeter Conference 2004 in Milan, Italy. We also would like to thank two anonymous referees for their constructive criticism and suggestions. The usual disclaimers apply. Correspondence to: A. Reinstaller     

Does the Energy-Efficiency Paradox Exist? Technological Progress and Uncertainty

We explain why firms may choose not to undertake investments inenergy-saving technologies that appear profitable from a net presentvalue perspective. As future technological advances are inherentlyuncertain and investments in new technology are, at least partly,irreversible, it may ``pay' to postpone investments in energy savingand wait for the arrival of improved varieties. This insight casts doubton the existence of so-called ``low hanging fruits in energy saving'(although we do not wish to deny that organisational failures may alsobe important). Failure to appreciate the underlying stochasticity oftechnological progress may obscure the insight that there is value inwaiting, and costs involved in terminating the option to invest. Theappetite for low-hanging fruits will be less when these costs areincorporated in the analysis. We demonstrate that the effect of thearrival rate of new technologies on the adoption lag for a rational firmis ambiguous. The same holds for the effect of the expected ``jump' inefficiency of new technologies. Government policies aimed at enhancingthe adoption of new technologies through stimulation of R&D maytherefore be counterproductive.     

From groundnuts to globalization: A structural estimate of trade and growth

Starting with Romer (1987) and Rivera-Batiz-Romer (1991) economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels because producers gain access to new imported varieties. Second, increases in the number of varieties drives down the cost of innovation and results in ever more variety creation. Using highly disaggregate trade data, e.g. Gabon’ s imports of Gambian groundnuts, we structurally estimate the impact that new imports have had in approximately 4000 markets per country. We then move from groundnuts to globalization by building an exact TFP index that aggregates these micro gains to obtain an estimate of trade on productivity growth for each country. We find that in the typical country in the world, new imported varieties account for 10–25% of its productivity growth. However, when we structurally estimate the long-run impacts of these productivity growth effects, we find that import variety growth between 1994 and 2003 raised world permanent income by 17% .     

Farmers' preferences for crop variety traits: Lessons for on-farm conservation and technology adoption

Although in-situ conservation is increasingly considered an efficient way of conserving plant genetic resources, little is known about the incentives and constraints that govern conservation decisions among small farm holders in developing countries. Using a choice experiment approach, we investigated Ethiopian farmers' crop variety preferences, estimated the mean willingness to pay for each crop variety attribute, and identified household-specific and institutional factors that governed the preferences. We found that environmental adaptability and yield stability are important attributes for farmers' choice of crop varieties. Farmers are willing to forego some extra income or yield to obtain a more stable and environmentally adaptable crop variety. Among other things, household resource endowments (particularly land holdings and livestock ownership), years of farming experience, and contact with extension services are the major factors causing household heterogeneity of crop variety preferences. Based on our experimental results, we derived important policy implications for on-farm conservation, breeding priority setting, and improved variety adoption in Ethiopia.     

Broadband adoption and content consumption

We explore how broadband access drives changes in the quantity and diversity of consumption of online content by using panel data that describes household Internet usage before and after broadband adoption. Our data suggests that on average, broadband adoption increases usage by over 1300 min per month. We also find that information consumption becomes more evenly distributed within the population, driven in part by post-adoption usage gains of almost 1800 min per month among individuals who were in the lowest usage quintile before adopting broadband. After adopting broadband, this pre-adoption lowest-usage quintile consumes content in greater quantities than users in neighboring quintiles, passing both the second and third quintiles in terms of absolute usage. This suggests that these users may have had strong preferences for high-bandwidth content that was too costly to consume in a narrowband environment. We also show that broadband adoption increases the variety of content that users consume although many of these gains appear to be associated with an increase in the variety of sites visited within previously visited content categories rather than an expansion in the types of content consumed.     

Adoption and impact of improved maize varieties on maize yields: Evidence from central Cameroon

This study uses both the endogenous switching regression and propensity score matching models to analyze the adoption and impact of improved maize varieties on maize yields in central Cameroon. The results show that (i) education level, agricultural training, proximity to an Institute of Agricultural Research for Development branch and farmers’ perceptions of yield and risk of improved maize varieties significantly affect the adoption of improved maize varieties and (ii) the adoption of improved maize varieties enhances maize yields. Therefore, policies designed to stimulate adoption of improved maize varieties should be promoted. Improvement of access to school and agricultural training may serve as good strategies for promoting the adoption of improved maize varieties in Cameroon.     

REGULATORY DEALING: TECHNOLOGY ADOPTION VERSUS ENFORCEMENT STRINGENCY OF EMISSION TAXES

We analyze the role of targeted enforcement of emissions taxes when the regulator wants to minimize aggregate emissions via the adoption of new more environmentally friendly technology. The regulator wants to speed up the path of technology adoption generated by a policy of uniform enforcement (that monitors adopters and nonadopters with the same probability) by engaging in a regulatory deal where a reduced monitoring probability is granted in “exchange” for adoption of the new technology. We set up a theoretical model, characterize the circumstances in which such dealing minimizes aggregate emissions, and test our hypothesis using economic laboratory experiments. Our analytical and experimental results suggest that even though such a deal might imply an increased level of violation by adopters, such tolerance is rather an integral part of an overall enforcement strategy that minimizes aggregate emissions when the rate of adoption is endogenous. (JEL L51, Q53, Q55, Q58)     

Irreversible investment with uncertainty and strategic behavior

The paper provides a model of technology adoption in the case where adopting alone is more expensive than adopting when others have already done so (network effect). In addition, if each agent gains at the expense of his rivals, he may also have an incentive for ‘preemptive adoption’. We deal with these two issues in a dynamic programing framework, where adoption is seen as a strategic switching time decision problem for agents facing an ongoing stochastic operating benefit plus sunken investment costs. The model defines the option value of investing for a continuous time stochastic game. In the case of network benefits alone, agents follow a stationary bandwagon strategy, representing the effect caused by a war of attrition. Yet, as network benefits reduce adoption costs after an agent has switched, rivals may follow suit. In the opposite case, where going first gives the innovator a higher payoff the bandwagon rule is turned over and the option value of investing first may be lower than that of going second. This gives rise to sequential adoption.     

Trade Policy in the Presence of Economies of Scale and Product Variety*

It is well known that laissez faire may not be the ‘first-best’ policy in a closed economy where economies of scale are present. Corden has shown that this conclusion can carry over into an open economy, though under his assumption that imported goods are perfect substitutes for home-produced goods, interference with international trade could not raise real income. We have shown that where there are economies of scale, and imported goods are not identical to the home produced goods, interference with trade could raise real national income, though such a form of intervention would not normally be optimal. Further, it could even be desirable to support home production of more than one ‘variety’. Measurements of ‘costs of protection’ that aggregate several varieties into one may mislead not only regarding the size of the cost but even regarding its sign.     

An optimal production method for penetrating foreign markets: Standardization,localization, and flexible technology

This paper examines firms' production strategies for supplying products tailored to the target country's local taste: developing a new localized variety and modifying an existing variety to fit the local taste. Adopting the concept of the flexible technology in industrial organization theory, the paper develops a simple theoretical model to examine when and why exporters or multinationals adopt flexible technologies to serve multiple markets. The results suggest that firms with basic varieties that are considerably different from the variety demanded by the local country are likely to develop localized varieties to serve the country, whereas those with basic varieties that are considerably similar to the demanded variety are likely to modify their existing varieties. In some circumstances, even when foreign production has an intrinsic cost advantage over exporting before the application of a flexible technology, firms may choose to be exporters by adopting the technology. In addition, the results indicate a possible industry equilibrium: Firms with basic varieties that are considerably similar to the variety demanded by the local country are likely to modify them and become multinationals, whereas those with basic varieties that are considerably different from the demanded variety are likely to develop new localized products and become multinationals. Otherwise, firms are likely to modify their existing platforms and become exporters.     

Population Growth, Technological Adoption, and Economic Outcomes in the Information Era

In this paper we argue that population growth, through its interaction with recent technological and organizational developments, may account for many cross-country differences in economic outcomes observed among industrialized countries over the past 20 years. In particular, our model illustrates how a large decrease in the price of information technology can create a comparative advantage for high population growth economies to jump ahead in the adoption of computer- and skill-intensive modes of production. They do this as a means of countering their relative scarcity of physical capital. The predictions of the model are that, over the span of the information revolution, industrial countries with higher population growth rates will experience a more pronounced adoption of new technology, a better performance in terms of increased employment rates, a poorer performance in terms of wage growth for less skilled workers, a larger increase in the service sector, and a larger increase in the returns to education. We provide preliminary evidence in support of the theory based on an examination of broad wage movements, employment changes, and computer adoption patterns for a set of OECD countries. Journal of Economic Literature Classification Numbers: O33, J31, J11.     

Product differentiation in successive vertical oligopolies

Abstract.  This is a successive oligopoly model with two varieties of a final product. Downstream firms choose one variety to sell on a final market. Upstream firms specialize in the production of one input specifically designed for one variety, but they also produce the input for the other variety at an extra cost. We show that as more downstream firms choose one particular variety, more upstream firms specialize in the input specific to that variety, and vice‐versa. Multiple equilibria may result, and the softening effect of product differentiation on competition might not be strong enough to induce maximal differentiation. JEL Classification: L11, L13, L23     

Geopolitical Maize: Peasant Seeds,Everyday Practices,and Food Security in Mexico

This paper draws from research on small-scale maize production in Mexico’s Central Highland region to discuss the geopolitical implications of everyday agricultural practices. An overwhelming majority of maize farmers in this region, as well as in the country more broadly, continue to cultivate locally adapted maize varieties they have bred themselves – criollo maize is the vernacular term – despite decades of concerted government attempts to effect the widespread adoption of commercially bred and licensed hybrid varieties. This state effort to restructure agricultural systems and food security according to nationalist and capitalist priorities is one tactic in a long and violent struggle for control over peasant land and labour in Mexico. By integrating feminist scholarship in geopolitics and in political ecology, I am following the lead of geographers who regard the materialities of everyday life as a foundation for political tensions and conflicts that are constantly unfolding along intersecting lines of difference. Though geopolitics has rarely turned its attention directly to theories of intimate socio-ecological relations, I argue that the field has much analytical and political leverage to gain by engaging with political ecology, and that feminist geographic imaginaries provide a crucial space in which to do so. This approach allows for an analysis of how a dominant geopolitics of land and agriculture is being undermined through the routine production of criollo maize, revealing new potential for creating broad political alliances with social movements that are currently working toward alternative visions of agriculture and food security.     

Domestic technology,consumption economies of scale and poverty: evidence from Sri Lanka

While it is well known that new technologies enhance consumer welfare, the manner in which these technologies impact the ability to realize economies of scale in consumption is not well understood. We use Sri Lankan household data to examine how the adoption of new technologies by households positively impacts their ability to achieve household economies of scale. This suggests that new technologies not only deliver a greater variety of consumption goods to consumers, but they may also play an important role in enabling large households to escape poverty by lowering the per-capita costs of maintaining a given standard of living. Given the importance of consumption economies of scale in the measurement of poverty, this study provides some insights on the extent to which the number of poor households changes when food consumption scale economies due to technology adoption in the domestic sphere are incorporated.     

Unbundling the local loop

We study competition for high bandwidth services in the telecommunications industry by introducing the possibility of unbundling the local loop, where leased lines permit the entrant to provide services without building up its own infrastructure. We use a dynamic model of technology adoption and study the incentives of the entrant to lease loops and compete “service-based”, and/or to build up a new and more efficient infrastructure and compete “facility-based”, given the rental price.We show that the incumbent sets too low a rental price for its loops; hence, the entrant adopts the new technology too late from a social welfare perspective. The distortion may appear not only on the timing of technology adoption but also on the type (quality) of the new technology to be adopted. We also show that while regulating the rental price may suffice to achieve socially desirable outcomes, a sunset clause does not improve social welfare.     

Evolutionary economics and economic geography

This article attempts to explore how key notions from Evolutionary Economics, such as selection, path-dependency, chance and increasing returns, may be applied to two key topics in Economic Geography. The first issue is the problem of how to specify the (potential) impact of the spatial environment on new variety in terms of technological change. Evolutionary thinking may be useful to describe and explain: (1) the process of localized `collective' learning in a regional context, (2) the adjustment problems that regions may be confronted with in a world of increasing variation, and (3) the spatial formation of newly emerging industries as an evolutionary process, in which the spatial connotation of increasing returns (that is, agglomeration economies) may result in a spatial lock-in. The second issue is the problem of how new variety may affect the long-term evolution of the spatial system. We distinguish three approaches that, each in a different way, apply evolutionary notions to the nature of spatial evolution. This is strongly related to the issue whether mechanisms of chance and increasing returns, rather than selection and path-dependency, lay at the root of the spatial evolution of new technology.     

Cooperative membership and new technology adoption of family farms: Evidence from China

Various policies have been implemented to encourage the development of family farms and cooperatives in the past decade in China. New technology adoption is a crucial part in promoting the performance of family farms. However, empirical evidence on whether and how cooperatives would facilitate family farms to adopt new technologies remains unclear. To address the gap, this paper examines the impact of family farms’ cooperative membership on new technology adoption (i.e., new varieties, new machinery, new fertilizers, new pesticides, new pest control techniques, new production methods and new management methods). Using novel survey data from 848 family farms in China, and employing both propensity score matching approach and endogenous switching probit model, we find that for family farms, cooperative membership has positive and significant impacts on new technology adoption. When looking into different types of technology, we find that the impacts are larger on the adoption of new methods than new techniques. Moreover, the impacts are larger for family farms with lower operation income and smaller size. The findings provide important insights for policymakers tasked with promoting agricultural technology adoption.     

The limits of policy: Public acceptance and the reform of science and technology governance

The adoption of a variety of new regulatory approaches and concepts, decision making processes and educational frames over the last three decades can be interpreted as an attempt to improve social acceptability of the process of science and technology governance. However, as argued in this paper, neither the introduction of non-standard scientific methodology and precautionary policy, nor participatory decision making, nor increased scientific-technological education are likely to significantly improve social acceptance of science and technology governance. Such reforms may shift the focus of ongoing policy debates, but do not lead to closure. In consequence, more research is needed on the complex relationship between acceptance, trust, information and participation, the implications of non-standard methodology in regulatory decision making, as well as the different interpretations that stakeholders may give to key regulatory concepts.     

Do firms with larger patent portfolios create more new plant varieties in the US agricultural biotechnology industry?

This article is an empirical analysis of the relationship between patent ownership and variety innovation for US agricultural biotechnology firms in the years 1976–1999. Counts of new varieties include corn, soybean, or wheat varieties protected by either patents or plant variety protection certificates, while patent portfolio size is defined as the count of a firm's gene and method patents. Negative binomial regression results indicate that firms with larger patent portfolios did not exhibit scale economies in variety creation nor did firms with wider technological diversity in their patent portfolios create significantly greater numbers of new varieties. However, firms experienced positive spillover effects from rival firms’ patent ownership, and patent ownership increases this effect. Sample firms that have merged in the past do not produce significantly greater numbers of new varieties after considering an increase in portfolio size and did not experience greater economies of scale in creating new varieties compared with firms that experienced no past mergers.     

Intra-industry trade and business cycles in ASEAN

The innovation adoption literature has focused primarily on a producer's decision of whether and how much to adopt. An equally pertinent question is when to adopt, because in the case of new technologies it often ‘pays to wait’ for more information. We propose a double-limit hurdle model to analyse adoption intensity and inertia in the context of a divisible technology. The proposed framework incorporates probit or Tobit models as testable special cases. A maximum likelihood estimation framework is set out and generalized to account for heteroscedastic errors. The empirical analysis, which uses household-level data from India's semi-arid tropics, provides new insights into the factors influencing adoption inertia and intensity.