In the first decade of the 21st century, the Latin America and the Caribbean region achieved strong growth with greater shared prosperity. Between 2000 and 2014, the region reduced poverty from 43 to 23 percent. For the first time, more people were in the middle class than those living in poverty. Now, all countries face the challenge of sustainably expanding these social achievements based on productivity growth. That’s why increasing productivity needs to become a top priority by adopting new-to-the-firm technologies in ways that both improve the job prospects of lower-skilled workers and increase the incomes of the poorest. To design development policies, we need an understanding of the impact of new technology adoption on inclusive growth—growth that improves the job prospects of lower-skilled workers. This is even more important given the new wave of digitalization and automation that is rapidly altering many economies around the world. One of the key findings presented here is that lower-skilled workers can, and often do, benefit from adoption of productivity-enhancing technologies biased toward skilled workers. Concerns that lower-skilled workers will be replaced by new technologies are often misplaced in practice. With a supportive business environment and procompetitive enabling policies and institutions, higher firm output based on increased productivity can expand sufficiently to increase jobs across all tasks and skill types within adopting firms—as long as low-skill occupations are not predominantly automated and displaced by the new technologies. Cross-country studies highlight additional ways that digital technology adoption can fuel inclusive growth, including lowering the fixed costs of exporting through online trading platforms, reducing mobility costs for workers in poorer countries, and increasing labor market efficiency through Internetenabled worker-firm job matches. This research highlights the critical role of three types of policies supporting growth and jobs from technology adoption. First, technology diffusion policies should ensure that all businesses have access to the latest global technologies at competitive prices. Second, product market policies should ensure that adopting businesses have the incentives and opportunities to grow. Third, education, skill, and labor market policies should ensure that workers are equipped with the right skills and that businesses can flexibly deploy workers to meet changing business needs. Implementation of these policies will help ensure that technology adoption has a positive impact on both productivity and workers in this new technological age.

Foreword ix Acknowledgments xi About the Authors xiii Executive Summary xv Abbreviations xxi Chapter 1 Introduction 1 Channels Linking Technology to More Inclusive Growth 2 Policies to Enable the Positive Impacts of Technology 6 Notes 9 References 9 Chapter 2 The Need for Productivity-Enhancing Technology Adoption in Latin America and the Caribbean 11 References 16 Chapter 3 A Conceptual Framework 17 What Do We Know? 18 Predictions about the Diverse Impacts of Technology Adoption 19 Notes 25 References 25 Chapter 4 New Lessons from the Region on the Impacts of Technology Adoption 27 Impact on Firm Productivity and the Demand for Jobs, Types of Skills, and Wages 29 Impacts on Job Dynamics and the Role of Complementary Investments in Skills 32 The Role of Labor Market Regulations on Firms’ Decisions and Jobs Outcomes 33 Impacts of Technology on Firms and Workers through Trade and Labor Mobility 35 Notes 36 References 37 Chapter 5 Improving the Environment for Technology Adoption with Inclusion 39 Technology Diffusion Support Policies 41 Product Market Policies 42 Education, Skills, and Labor Market Policies 45 Notes 47 References 48 Chapter 6 Conclusions 51 Questions for Further Research 53 Reference 54 Appendix A Background Studies 55 Appendix B Detailed Literature Review 57