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The Geography and Channels of Diffusion at the World's Technology Frontier

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Wolfgang Keller

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Abstract

Convergence in per capita income turns on whether technological knowledge spillovers are global or local. Global spillovers favor convergence, while a geographically limited scope of knowledge diffusion can lead to regional clusters of countries with persistently different levels of income per capita. This paper estimates the importance of geographic distance for technology diffusion, how this changed over time, and whether international trade, foreign direct investment, and communication flows serve as important channels of diffusion. The analysis is based on examining the productivity effects of R&D expenditures in the world's seven major industrialized countries between 1970 and 1995. First, I find that the scope of technology diffusion is severely limited by distance: the geographic half-life of technology, the distance at which half of the technology has disappeared, is estimated to be only 1,200 kilometers. Second, technological knowledge has become a lot more global from the early 1970s to the 1990s. Third, I estimate that trade patterns account for the majority of all differences in bilateral technology diffusion, whereas foreign direct investment and language skills differences contribute circa 15% each. Lastly, these three channels together account for almost the entire localization effect that would otherwise be attributed to geographic distance.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8150.

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Date of creation: Mar 2001
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Handle: RePEc:nbr:nberwo:8150

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O3 - Economic Development, Technological Change, and Growth - - Technological Change
F2 - International Economics - - International Factor Movements and International Business

References listed on IDEAS
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  1. K. H. O'Rourke, 2001. "Globalization and Inequality: Historical Trends," CEG Working Papers 20015, Trinity College Dublin, Department of Economics. [Downloadable!]
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  2. Jürgen Bitzer & Andreas Stephan, 2007. "A Schumpeter-inspired approach to the construction of R&D capital stocks," Applied Economics, Taylor and Francis Journals, vol. 39(2), pages 179-189, February. [Downloadable!] (restricted)
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  3. Somwaru, Agapi & Tuan, Francis & Gehlhar, Mark & Diao, Xinshen & Hansen, Jim, 2008. "Developing Country Trade: Implications of China’s Changing Trade and Competitiveness in Intensive and Extensive Margin Goods," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6239, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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  5. Das, Gouranga Gopal & Andriamananjara, Soamiely, 2004. "Hub-and-Spokes Free-Trade-Agreements in the Presence of Technology Spillovers: An Application to the Western Hemisphere," Working Papers 15870, United States International Trade Commission, Office of Economics. [Downloadable!]
  6. Francoise Lemoine & Deniz Unal-Kesenci, 2002. "China in the International Segmentation of Production Processes," Working Papers 2002-02, CEPII research center. [Downloadable!]
  7. Maria Abreu & Henri L.F. de Groot & Raymond J.G.M. Florax, 2004. "Spatial Patterns of Technology Diffusion: An Empirical Analysis using TFP," Tinbergen Institute Discussion Papers 04-079/3, Tinbergen Institute. [Downloadable!]
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  8. Alessia Amighini, 2004. "China in the international fragmentation of production: Evidence from the ICT industry," CESPRI Working Papers 151, CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy, revised Jan 2004. [Downloadable!]
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  9. James H. Love, 2003. "Technology sourcing versus technology exploitation: an analysis of US foreign direct investment flows," Applied Economics, Taylor and Francis Journals, vol. 35(15), pages 1667-1678, October. [Downloadable!] (restricted)
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  11. Lileeva, Alla, 2006. "Liaisons globales - Les avantages de l'investissement direct de l'étranger pour les établissements sous contrôle canadien : le rôle des liens verticaux," L'économie canadienne en transition 2006010f, Statistics Canada, Division de l'analyse économique. [Downloadable!]
  12. Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Contribute to Skill Upgrading in Developing Countries?," SCEPA Working Papers 2002-08, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
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  14. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," NBER Working Papers 8724, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Lumenga-Neso, Olivier & Olarreaga, Marcelo & Schiff, Maurice, 2001. "On"indirect"trade-related research and development spillovers," Policy Research Working Paper Series 2580, The World Bank. [Downloadable!]
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  17. Lileeva, Alla, 2006. "Global Links: The Benefits to Domestically-controlled Plants from Inward Direct Investment - The Role of Vertical Linkages," The Canadian Economy in Transition 2006010e, Statistics Canada, Economic Analysis Division. [Downloadable!]
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