The Role of Information in Technology Adoption under Poverty
An important channel through which globalization affects poverty is introducing new technologies to developing countries. Adoption of new technologies can be hindered by uncertainties about their efficiency.
One of the major approaches to reducing the world’s poverty is to promote the adoption and diffusion of new technologies in less developed regions. Green Revolution, by introducing new seeds and intensive agriculture, helped millions of people out of poverty. Efficient irrigation systems such as sprinkler and drip irrigation not only improve productivity but also help preserve scarce water resource. Biotechnologies and genetically modified foods could potentially significantly increase food production in developing countries.
Globalization has the potential of making new technologies available to developing countries. However, it is the adoption and diffusion that eventually determine whether developing countries can truly benefit from the new technologies brought to them through the globalization process. Technology adoption and diffusion face two main obstacles in developing regions: the lack of capital, credit and risk-sharing, and the lack of information.
A new technology may require sizable sunk investment, and adopting it could be a risky business. Facing limited financial resource and risk sharing, agents would be reluctant to adopt ”profitable” technologies if there is a chance that the technologies fail since the sunk adoption costs cannot be recouped.
