International Trade, Technology Diffusion, and the Role of Diffusion Barriers
AbstractThis paper assesses the welfare impact of trade and technology diffusion as well as the change in the cross-country distribution of GDP due to removal of trade costs and diffusion barriers. The model extends the multi-country Ricardian trade model of Alvarez and Lucas (2007) to include technology diffusion with diffusion barriers. A key feature of the model is that some countries export goods produced by foreign technology via diffusion. The model is calibrated to match the world GDP distribution, the merchandise trade and technology diffusion shares of GDP, and real GDP per capita for a sample of 31 countries. Data on international trade in royalties, license fees, and information intensive services are used as proxies for international technology diffusion. There are three key findings. First, the welfare gains from removing diffusion barriers are 4--60% across countries, generally larger than the gains from removing trade costs (8--40%). The main reason is that diffusion has a larger impact on the nontradable sector due to the substitutability between trade and diffusion in the tradable sector. Another reason is that diffusion barriers are generally larger than trade costs. Second, removing trade costs and diffusion barriers has little impact on reducing the dispersion of real GDP per capita (measured by Gini index) across countries. Compared to the benchmark, free diffusion decreases the Gini by 4%, and free trade decreases the Gini by 2%. Third, removing diffusion barriers increases trade, which indicates that diffusion may enhance trade.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39409.
Date of creation: 01 Jan 2010
Date of revision: 01 Dec 2011
trade; technology diffusion; diffusion barriers; trade costs; welfare gains; GDP distribution; knowledge trade;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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