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Technology Trade in Economic Development

  • Matthias Busse
  • José L. Groizard

Recent evidence on the respective contributions of institutions and trade to income levels across countries has demonstrated that - once endogeneity is considered - institutional quality clearly dominates the effect of trade. We argue that overall trade is not the most appropriate measure for technology diffusion as a source of productivity growth and propose to focus on imports of research and development (R&D)-intensive goods instead. Overall, we confirm previous findings that institutions matter most and that overall trade is not positively associated with per-capita income levels. Yet this does not hold for technology trade, as there is a positive and significant linkage between technology imports and income levels. This outcome is robust to various model specifications, including an instrumental variables approach. Copyright 2007 The Authors.

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Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 31 (2008)
Issue (Month): 4 (04)
Pages: 569-592

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Handle: RePEc:bla:worlde:v:31:y:2008:i:4:p:569-592
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