Diego A. Comin

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If Technology Has Arrived Everywhere, Why Has Income Diverged?

Diego A. Comin and Martí Mestieri Ferrer

To respond to the question posed in the title of their paper, the authors explore one potential driver—the dynamics of technology adoption. Using a stylized model of adoption that accounts for individual technologies, the authors identify two margins of adoption: adoption lags and penetration rates. Analyzing a panel of adoption lags and penetration rates for 25 technologies and 132 countries, they show that adoption lags have converged across countries over the last 200 years, while penetration rates have diverged. Feeding these patterns into the aggregate representation of their model economy, they next evaluate the effects of cross-country evolution of adoption patterns on the cross-country evolution of income growth. The paper's main finding is that the evolution of adoption patterns accounts for the vast majority of cross-country evolution of income growth for many country groupings. Therefore, adoption dynamics are at the core of cross-country differences in per-capita income over the last 200 years, a phenomenon known as the Great Divergence. Read More

The Spatial Diffusion of Technology

Diego A. Comin, Mikhail Dmitriev, and Esteban Rossi-Hansberg

Technology disparities are critical for explaining cross-country differences in per capita income. Despite being non-rival in nature and involving no direct transport costs, technology diffuses slowly both across and within countries. Even when a technology has arrived in a country, it takes years and even decades before it has diffused to the point of having a significant impact on productivity. Why does technology diffuse slowly? How do we explain cross-country differences in its speed of diffusion? In this paper, the authors study the diffusion over time and space of 20 major technologies in 161 countries over the last 140 years. The spatial effects they identify for technologies vanish over time. For most technologies, this implies that the effect of geography is initially strong, decays over time, and eventually disappears. This is the first paper to document these patterns in adoption rates for a large number of technologies and countries. Estimates provided of structural parameters can be used to inform spatial theories of growth. Open for comment; 0 Comments posted.

How Technology Adoption Affects Global Economies

In a series of research papers, Associate Professor Diego A. Comin and colleagues investigated the relationship between technology adoption and per capita income. They found that the rate at which nations adopted new tools hundreds of years ago strongly affects whether those nations are rich or poor today. Open for comment; 11 Comments posted.

An Exploration of Luxury Hotels in Tanzania

Diego A. Comin

Tanzania is justly famous for its incredible natural landmarks such as the Rift Valley, Ngorongoro Crater, Lake Manyara, Mount Kilimanjaro, Zanzibar, and, above all, the Serengeti and the Great Migration. Why, despite being so richly endowed in touristic resources, does Tanzania receive relatively few tourists and little revenue from tourism? Diego Comin explored the drivers and influencing factors on the size of the tourism sector, using as a starting point the abnormally high prices of upscale hotels in Tanzania, especially in the safari areas. Findings suggest that the cost of supplying upscale hotel services is not sufficient to explain the abnormally high prices, and the more likely candidate is high markups. Interviews with hotel managers supported this conclusion. In addition, while cross-country differences in demand are large, once we control for these differences, discrepancies in upscale hotel prices account for a significant share of cross-country differences in demand, and cross-country differences in demand are very persistent. On the basis of the role of word-of-mouth, learning by doing, and pecuniary externalities in driving differences in demand, there may be room for the Tanzanian government to induce lower hotel prices and to try to independently increase the foreign perception of the country's attractiveness. Read More

The Intensive Margin of Technology Adoption

Diego Comin and Martí Mestieri

To anyone who observes the world, it's pretty clear that a country's poverty level is at least somewhat related to its adoption of new technologies. Historically, though, this fact has been difficult to quantify. Harvard Business School professor Diego Comin and MIT researcher Martí Mestieri are developing a model to analyze the relationship between economic growth and technology adoption. In their paper, they discuss both "extensive" margins (the length of time it takes a country to adopt any given new technology) and "intensive" margins (the number of technology units--smartphones, PCs, etc.--that the country adopts). Read More

Medium Term Business Cycles in Developing Countries

Diego Comin, Norman Loayza, Farooq Pasha, and Luis Serven

Business cycle fluctuations in developed economies tend to have very strong effects on developing countries, says a new study by Harvard Business School professor Diego Comin, Norman Loayza and Luis Serven of the World Bank, and Farooq Pasha of Boston College. The researchers have developed a quantitative model capable of explaining the amplitude and persistence of the effect that U.S. shocks have on Mexico's macroeconomic variables. The model is then used to provide an account of the drivers of business fluctuations in developing economies. Read More

Medium Term Business Cycles in Developing Countries

Diego Comin, Norman Loayza, Farooq Pasha, and Luis Serven

At the end of 2007, the U.S. economy entered a recession that, by the first quarter of 2009, had reduced U.S. GDP by 2.2 percent. The Mexican economy was showing no sign of distress until the U.S. recession began. Despite that, Mexican GDP declined by 7.8 percent during the same period. This and similar episodes from other developing countries motivate several questions: Why do shocks to developed economies affect developing countries to such an extent? Does the response of developing economies to shocks that originate in their developed neighbors account for the larger volatility of developing economies? More broadly, what ingredients do macroeconomic models need to incorporate in order to account for the unique features of economic fluctuations in developing economies? To investigate these questions, the researchers developed a two-country asymmetric model to study the business cycle in developing countries. The mechanisms introduced in the model should provide an accurate account of business cycles in other developing countries. Read More

Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations

Diego A. Comin, Mark Gertler, and Ana Maria Santacreu

A central challenge to modern business cycle analysis is that standard macro models are unable to generate fluctuations in the stock market with the amplitude, persistence, and lead-lag pattern observed in the data. At the same time, standard macro models predict that good news about future, such as those received during 1994-1995 on the arrival of IT, lead to recessions rather than expansions. HBS professor Diego Comin and coauthors develop a model that overcomes these two problems by explicitly incorporating an endogenous speed of diffusion of technologies that is increasing in the resources spent in adoption. Revisions in beliefs about future profits generate fluctuations in the stock market with the amplitude and lead over output observed in the data. The firms' investment decisions in adoption leads to a shift in labor demand that increases hours worked and output. Read More

The Unseen Link Between Savings and National Growth

Diego A. Comin

Professor Diego Comin and fellow researchers find a little observed link between private savings and country growth. The work may offer a simple interpretation for the East Asia "miracle" and for failures in Latin America. Q&A. Read More

When Does Domestic Saving Matter for Economic Growth?

Philippe Aghion, Diego Comin, Peter Howitt, and Isabel Tecu

The researchers begin with a simply stated question: Can a country grow faster by saving more? Long-run growth theories imply that a country can grow faster by investing more in human or physical capital or in R&D, but that a country with access to international capital markets cannot grow faster by saving more. Domestic saving is therefore not considered an important ingredient in the growth process because investment can be financed by foreign saving. From the point of view of standard growth theory, the positive cross-country correlation between saving and growth that many commentators have noted appears puzzling. HBS professor Diego Comin and colleagues develop a theory of local saving and growth in an open economy with domestic and foreign investors. Read More

An Exploration of the Japanese Slowdown during the 1990s

Diego A. Comin

Why was the 1990s a lost decade for Japan? HBS professor Diego Comin argues that it was the combination of some shocks that lasted for about three years and the response of companies that drastically reduced their expenses in adopting new technologies and developing new ones. Though the severe shocks that hit the Japanese economy did not persist, the investments that Japanese companies and entrepreneurs did not undertake to improve technology and production methods during the 1990s propagated those shocks and made their effects very long-lasting. Read More

Turbulent Firms, Turbulent Wages?

Diego A. Comin, Erica L. Groshen, and Bess Rabin

Has more creative destruction among firms raised wage volatility in the United States? Most of the related research on the remarkable and well-documented widening of wage inequality in the U.S. over the past three decades focuses on permanent components of workers' earnings, particularly the rising returns to education and ability associated with technological change, trade, and de-unionization. Less is known, however, about the contribution of larger transitory fluctuations. HBS professor Comin and colleagues explore whether workers' average pay is more volatile in firms that have experienced higher turbulence in sales. Findings have important implications for theories of labor markets and optimal wage compensation schemes. Read More

Was the Wealth of Nations Determined in 1000 B.C.?

Diego A. Comin, William Easterly, and Erick Gong

To the extent that history is discussed at all in economic development, it is usually either the divergence associated with the Industrial Revolution or the effects of colonial regimes. Is it possible that precolonial, preindustrial history also matters significantly for today's national economic development? The authors find that technology adoption circa 1500 A.D., prior to the era of colonization and extensive European contacts, predicts approximately 50 percent of cross-country differences in both current per capita income and technology in a large cross-section of countries. When exploring the causes of this extreme persistence in technology, they find evidence in favor of the importance of the effect of current adoption on subsequent adoption as the main driver. This leaves a limited role to country-specific factors such as institutions, geography, or genes to explain the persistence of technology. Read More

An Exploration of Technology Diffusion

Diego A. Comin and Bart Hobijn

How long are technology adoption lags? Can cross-country differences in technology adoption lags account for a significant fraction of cross-country GDP disparities? Diego Comin of Harvard Business School and Bart Hobijn of the Federal Reserve Bank of New York develop a new benchmark to understand the diffusion process of individual technologies and the consequences that this has for aggregate growth. This benchmark provides a rationale for the evolution of diffusion measures that include how many units of technology each adopter has adopted in addition to the traditional extensive margin. The model is estimated to obtain measures of adoption lags for 15 technologies in 166 countries. Read More