Technology and Development

Market access matters because many technologies require scale. Fixed adoption costs are easier to justify when firms can spread them over larger sales. Larger and richer markets may also reward quality upgrading. Trade and market integration can further give firms access to better intermediate inputs, foreign buyers, and production knowledge. Market access therefore raises the return to adoption through several channels: scale, quality demand, imported inputs, competition, and direct knowledge transfer.

The evidence is strongest where shocks to market access can be identified. Export opportunities induce firms to upgrade technology, invest in quality, and use more advanced inputs (Verhoogen 2008, Lileeva and Trefler 2010, Aw et al. 2011, Bustos 2011, De Loecker 2013, Garcia-Marin and Voigtländer 2019, Tanaka 2020, Atkin, Khandelwal et al. 2025). Input-market access is another important margin. Lower input tariffs expanded the set of products produced by Indian firms and generated larger productivity effects than output-tariff reductions (Goldberg et al. 2010, Topalova and Khandelwal 2011, Fieler et al. 2018). Foreign buyers and multinationals can also transmit know-how directly through supplier relationships and global value chains (Javorcik 2004, Blalock and Gertler 2008, Guadalupe et al. 2012, Abebe et al. 2022, Alfaro-Urena et al. 2022, Bai et al. 2025a, Garetto, Pavcnik, Ramondo et al. 2025).

Domestic market access works through similar channels. In agriculture, remoteness is associated with lower adoption of modern inputs, while roads and access to quality-differentiated markets can raise input use, productivity, and technology adoption (Suri 2011, Aggarwal 2018, Asher and Novosad 2020, Shamdasani 2021, Bold et al. 2022, Aggarwal et al. 2024). Spatial density can also improve access to inputs and raise aggregate productivity, even among small-scale producers (Caunedo et al. 2022).

The effects of market access are heterogeneous. Firms closer to the frontier may respond to larger markets by upgrading quality and innovating, while firms farther from the frontier may contract or move towards simpler activities (Pavcnik 2002, Amiti and Konings 2007, Amiti and Khandelwal 2013, Bloom et al. 2016, Aghion et al. 2024, Zhou et al. 2025). At the country level, import competition may also push economies out of complex sectors and slow capability accumulation (Atkin et al. 2025). Market access can therefore raise adoption, but it also reallocates activity across firms, sectors, and technologies.

Policy implications. The policy implication is not simply to increase openness everywhere. The relevant question is which margin of market access is being relaxed, and for which firms. Export promotion, transport connectivity, supplier development, and lower input tariffs can all increase adoption, but they operate through different constraints.

A practical lesson is that access to inputs and buyers is often more directly relevant for technology adoption than aggregate openness. Firms need the machines, intermediates, quality standards, and buyer relationships that make upgrading profitable. This is why trade policy, transport policy, and supplier-development policy are closely linked.

The second lesson is that heterogeneity is central. Market access is most likely to generate upgrading when firms have the capabilities needed to respond. Otherwise, openness may shift activity towards simpler sectors or towards firms already close to the frontier. Policies on this margin therefore interact with reallocation, worker mobility, and the ability of productive firms to expand.

For full reference list see the end of the conclusion chapter.