Firms play a crucial role in technological catch-up, which is essential for narrowing the productivity gap and improving material well-being in developing countries. Through adopting new technologies, firms enable higher-productivity jobs, potentially leading to increased wages and greater societal efficiency in producing goods and services. However, empirical evidence on the impact of technology adoption on firm outcomes in developing countries remains limited. This is particularly true regarding employee-related aspects such as firm employment and wages.
This project examines how the adoption of more advanced technology affects firm dynamics in Burundi. Using a standard randomised controlled trial where treatment firms received automatic sewing machines and control firms did not, the researchers investigate the impact of technology adoption within small, textile firms in six provinces of the country. They tracked the firms over time, from January to November 2024, with a pre-treatment, a 3-month post-treatment and a 6-month post-treatment surveys. The goal was to measure the short and medium-term effects of the new technology on (i) the number of layoffs and hires in each firm, (ii) output per worker, and (iii) real wages. They also collected a rich set of firm level variables, such as revenue, costs, investment and price of products. Lastly, they conducted a series of electricity surveys, to assess the reliability of the electrical grid in the regions of the study, and several qualitative surveys, to investigate potential mechanisms.
This project will produce insights to policymakers interested in increasing productivity in developing countries. Economic theory states that the adoption of more advanced technology is beneficial for society. However, in the short run, it can create unemployment and, more broadly, disrupt established markets. This project provides evidence on the impact of technology on employment and proposes ways to mitigate potential negative impacts. The project contributes to the emerging literature that studies the dynamics of technology adoption by firms in developing countries. Its main contribution is to study the impact of technology on employment and wages, specifically.
