Trade and technology transfer: a development

perspective

Alessandro Antimiani (INEA)Valeria Costantini (Università Roma Tre)

Paolo Liberati (Università Roma Tre)

III Workshop PRIN Treia, Macerata

03-04 Febbraio 2010

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Outline

IntroductionResearch questionsLiterature ReviewMethodology

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Introduction

The process of globalization has led to a greater integration of less developed countries into the world economyThe flows of trade, capital, labour, technology, and information across national borders have accelerated in recent decades and produced the conditions for faster economic growth and transmission of knowledge

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IntroductionEven though the role of international trade in enhancing economic growth has been recognized (Dollar and Kraay, 2004)…much more controversies in the scientific and political debate arise when a more general development framework is adopted (Ligon, 2006; Milanovic, 2006). The impact of globalisation on income distribution and social development may be strongly uneven depending on the domestic capacity to transform economic integration into development opportunities (Deaton, 2005; Stern and Deardorff, 2006).

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Research questions

To what extent the recent wave of globalisation has increased knowledge transfer from developed economies to developing countriesWhich factors play a role in explaining the geography of technological transferIf technology transfer is an existing phenomenon, which development dimensions are the most affected: it is a matter of pure economic growth, or a wider development perspective could be adopted.

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Literature reviewTechnology transferTechnology transfer

International technology spillovers are crucial factors in explaining growth performance of advanced economies (Coe and Helpman, 1995)

and international flows are important drivers of such spillovers (Eaton and Kortum, 1996)

Transfer via Trade (Keller, 2009; Madsen, 2007; Saggi, 2000) Transfer via FDI (Gholami et al., 2006; Keller, 2009; Markusen

and Venables, 1999; Saggi, 2000; World Economy Special Issue 2006)

Turning to developing countries this evidence is less strong, because specific national features assume a greater role in explaining the capacity to adopt the imported knowledge

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Literature reviewAncillary conditionsAncillary conditions

Economic structure similarity (Conley and Ligon, 2002; Franco et al., 2009)

Specific trade/FDI relationships (Acharya and Keller, 2008 for ICT; Lumenga-Neso et al., 2001 for indirect trade flows; Xu and Wang, 1999 for capital goods)

The economic integration degree into international markets (Chinn and Ito, 2006)

The quality of human capital (Coe et al., 2008; Engelbrecht, 1997)

Institutions and the public sector (Coe et al., 2008; Younas, 2009)

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Literature reviewTested effectsTested effects

Of the role of technology transfer Total Factor Productivity (Acharya and Keller, 2007; Coe

et al., 2008; Madsen, 2007; Mendi, 2006; Tang and Coevos, 2008)

Economic Growth (Eaton and Kortum, 1996; Erk et al., 2000; Conley and Ligon, 2002)

Of the role of a more general concept of trade openness and capital flows mobility

Capital mobility (Chinn and Ito, 2006; Younas, 2009) Development dimensions (Dalgin et al., 2004) Income distribution (Ligon, 2006; Topalova, 2005)

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Methodology

Export specialization patterns

Similarity matrix (Frenken et al., 2007; Los, 2000)

i= importing countries (145) j= exporting countries (OECD)k= 19 manufacturing sectors (Isic Rev.3)

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Methodology

Technology transfer measured by knowledge stock for each k sector (measured by patents as in Bottazzi and Peri, 2003; Madsen, 2007)

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ijk

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ijk KMSMT **2,1

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ijj

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only if i and j are neighbouring

Total import flows or import shares as in Acharya and Keller (2008)

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MethodologyDifferent aggregation criteria for the k sectors

n

k

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TOT TTTT1

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Simple aggregation, for total transfer or for macro-sectors

Variety vs. Concentration

We can employ a concentration index (e.g., Herfindahl) as autonomous information or as a weighting factor for technological transfer in absolute value

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Methodology

Test for alternative dependent variables compared with pure economic growth. Selected choices:

Human Development Index (UNDP and WDI) Human Poverty Index-1 (UNDP and WDI) Gini index (WDI, UNU-WIDER, Penn World

Tables) Poverty measures (WDI)

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Methodology

Test for alternative representations of the public sector:

Role of the public sector, as revenue to GDP ratio, or government expenditures to GDP ratio (WDI)

Institutional quality, as Rule of Law, Government effectiveness, Corruption index (WDI, Transparency International, Political Risk Service Group)

Combination of these dimensions in order to control for the existence of mutual causal relationships.

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Selected referencesAcharya, R., Keller, W., 2008, Technology Transfer through Imports,

Canadian Journal of Economics, Vol. 42 (4), pp. 1411-1448.Bottazzi, L., Peri, G., 2003, Innovation and spillovers in regions: Evidence

from European patent data, European Economic Review, Vol. 47 (4), pp. 687-710.

Coe, D. T., Helpman, E., 1995, International R&D Spillovers, European Economic Review, Vol. 39, pp. 859-887.

Coe, D.T., Helpman, E., Hoffmaister, A.W., 2008, International R&D Spillovers and Institutions, NBER Working Papers 14069.

Conley, T.G., Ligon, E., 2002, Economic distance and Cross-Country Spillovers, Journal of Economic Growth, 7, 157-187.

Dalgin M., Mitra, D., Trindade, V., 2004, Inequality, Nonhomotethic Preferences, and Trade: A Gravity Approach, NBER Working Paper 10800

Deaton, A., 2005, Measuring Poverty in a Growing World (or Measuring Growth in a Poor World), The Review of Economics and Statistics, Vol. 87 (1), pp. 1-19.

Dollar, D., Kraay, A., 2004, Trade, growth, and poverty, The Economic Journal, Vol. 114 (493), pp. 22-49.

Eaton, J., Kortum, S., 1996, Trade in Ideas: Patenting and Productivity in the OECD, Journal of International Economics, Vol. 40, pp. 251-278.

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Selected referencesEngelbrecht, H.J., 1997, International R&D Spillovers, Human Capital and

Productivity in OECD Economies: An Empirical investigation, European Economic Review, Vol. 41, pp. 1479-1488.

Franco, C., Montresor, S., Vitucci Marzetti, G., 2009, On Indirect Trade-Related R&D Spillovers: the “Average Propagation Length” of foreign R&D, European Corporate Governance Institute.

Frenken, K., Van Oort, F., Verburg, T., 2007, Related Variety, Unrelated Variety and Regional Economic Growth, Regional Studies, Vol. 41 (5), pp. 685-697.

Gholami, R., Lee, S.Y.T., Heshmati, A., 2006, The Causal Relationship Between Information and Communication Technology and Foreign Direct Investment, UNU-WIDER Working Paper, Helsinki.

Keller, 2009, International trade, Foreign Direct Investment, and technology spillovers, NBER Working Paper 15442.

Los, B., 2000, The empirical performance of a new inter-industry technology spillover measure, in Saviotti, P.P., Nooteboom, B. (Eds) Technology and Knowledge, pp. 118-151, Edward Elgar, Cheltenham.

Lumenga-Neso, O., Olarreaga, M., Schiff, M., 2005, On indirect trade-related R&D Spillovers, European Economic Review, Vol. 49 (7), pp. 1785-1797.

Madsen, J., 2007, Technology spillovers through trade and TFP convergence: 135 years of evidence for OECD countries, Journal of International Economics Vol. 72, pp. 464-480.

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Selected referencesMarkusen, J.R., Venables, A., 1999, Foreign Direct Investment as a Catalyst for

Industrial Development, European Economic Review, Vol 43 (2), pp. 335-356.Milanovic, B., 2006, Economic Integration and Income Convergence: not such a

Strong Link?, The Review of Economics and Statistics, Vol. 88 (4), pp. 659-670.Saggi, K., 2000, Trade, Foreign Direct Investment, and International Technology

Transfer, Policy Research Working Paper No. 2349, The World Bank, Washington DC.

Stern, R.M., Deardorff, A.V., 2006, Globalization’s Bystanders: Does Trade Liberalization Hurt Countries That Do Not Participate?, World Development, Vol. 34 (8), pp. 1419-1429.

Tang, L., Coveos, P. E., 2008, Embodied and disembodied R&D Spillovers to Developed and Developing Countries, International Business Review, No. 17, pp. 546-558

Topalova, P., 2005, trade Liberalization, Poverty and Inequality: Evidence from Indian Districts, NBER Working Paper Series, No. 11614.

World Economy Special Issue 2006, The World Economy, Vol. 29 (19),Xu, B., Wang, J., 1999, Capital Goods Trade and R&D Spillovers in the OECD,

Canadian Journal of Economics, Vol. 32, pp. 1258-1274.Younas, J., 2009, Does institutional quality affect capital mobility? Evidence from

developing countries, Journal of Institutional Economics, Vol. 5 (2), pp. 207-223.