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Working Papers

March 2021, No. 21-05R

Technology Adoption and Leapfrogging: Racing for Mobile Payments (Revised May 2024)

Pengfei Han and Zhu Wang

Paying with a mobile phone is a cutting-edge innovation that is transforming the global payments landscape. Some developing countries have surprisingly overtaken advanced economies in adopting the mobile payment innovation. We construct a dynamic model with sequential payment innovations to explain this phenomenon. Our estimated model matches cross-country patterns of payment technology adoption well and uncovers how advanced economies' past success in adopting card-payment technology holds them back in the mobile-payment race. Our analysis also shows that in the presence of payment externalities, subsidizing mobile payment adoption may enhance social welfare and can be more beneficial for developing countries.


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