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North-South Technology Diffusion: How Important Are Trade, FDI and International Telecommunications?

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    Abstract

    There is an influential literature studying the impact on total factor productivity (TFP) of foreign technology obtained through imports (trade). This paper builds on that literature and is a first attempt to examine the effects on TFP in the South of technology developed in the North that is diffused not only through international trade, but also through foreign direct investment (FDI) and international telecommunications (ITC) measured in call traffic. For developing countries in the South, we construct trade-related, FDI-related and ITC-related North foreign R&D indices, using country specific R&D stocks in the North, and respectively with North-South bilateral trade patterns, FDI patterns and ITC volumes. We find: (i) trade and ITC both significantly promote North-South technology diffusion, while FDI seems to generate North-South technology diffusion, though not always significantly; (ii) the effects on TFP through ITC-related foreign R&D are the largest, followed in order by those through trade-related, and then by those through FDI-related foreign R&D indices; and (iii) the effects on TFP of traderelated North foreign R&D are primarily driven by the growth in developing countries’ trade-to-GDP ratios, while the effects from ITC-related North foreign R&D are largely due to the growth in the Northern R&D stocks.

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    Bibliographic Info

    Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 06-01.

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    Length: 31 pages
    Date of creation: 15 Mar 2006
    Date of revision:
    Publication status: Published: Carleton Economic Papers
    Handle: RePEc:car:carecp:06-01

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    Keywords: Technology Diffusion; Trade; FDI; International telecommunications;

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    1. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, Elsevier, vol. 45(1), pages 115-135, June.
    2. Maurice Schiff & Yanling Wang, 2003. "Nafta, Technology Diffusion and Productivity in Mexico," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 469-476.
    3. Keller, Wolfgang, 2002. " Trade and the Transmission of Technology," Journal of Economic Growth, Springer, Springer, vol. 7(1), pages 5-24, March.
    4. Falvey, Rod & Foster, Neil & Greenaway, David, 2007. "Relative backwardness, absorptive capacity and knowledge spillovers," Economics Letters, Elsevier, Elsevier, vol. 97(3), pages 230-234, December.
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    6. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 46(02), pages 385-406, June.
    7. Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
    8. Dollar, David & Kraay, Aart, 2003. "Institutions, trade, and growth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(1), pages 133-162, January.
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    11. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, Elsevier, vol. 42(1), pages 51-74, October.
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    13. Andreas Savvides & Marios Zachariadis, 2005. "International Technology Diffusion and the Growth of TFP in the Manufacturing Sector of Developing Economies," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 9(4), pages 482-501, November.
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