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North-South technology diffusion, regional integration, and the dynamics of the “natural trading partners” hypothesis

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  • Maurice Schiff
  • Yanling Wang

Abstract

Based on static analysis, a number of studies argue that forming a regional trade agreement (RTA) is more likely to raise welfare if member countries are “natural trading partners,” while other studies claim the opposite. This paper considers the argument from a dynamic viewpoint by examining the impact of trade with Japan, North America and the EU on technology diffusion and total factor productivity (TFP) in Jordan, Korea and Mexico. Using industry-level data, we show that: i) technology diffusion and productivity gains tend to be regional: Jordan, Korea, and Mexico tend to benefit mainly from trade with the EU, Japan, and North America respectively; and ii) the dynamic version of the “natural trading partners” hypothesis seems to hold. JEL Classification: F02, F13, F15, F43, O39

Suggested Citation

  • Maurice Schiff & Yanling Wang, 2007. "North-South technology diffusion, regional integration, and the dynamics of the “natural trading partners” hypothesis," Revue d’économie du développement, De Boeck Université, vol. 15(5), pages 69-84.
  • Handle: RePEc:cai:edddbu:edd_215_0069
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    References listed on IDEAS

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    1. Keller, Wolfgang, 1998. "Are international R&D spillovers trade-related?: Analyzing spillovers among randomly matched trade partners," European Economic Review, Elsevier, vol. 42(8), pages 1469-1481, September.
    2. Lumenga-Neso, Olivier & Olarreaga, Marcelo & Schiff, Maurice, 2005. "On `indirect' trade-related R&D spillovers," European Economic Review, Elsevier, vol. 49(7), pages 1785-1798, October.
    3. Lawrence H. Summers, 1991. "Regionalism and the world trading system," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 295-301.
    4. Panagariya, A., 1997. "Preferential trading and the myth of natural trading partners," Japan and the World Economy, Elsevier, vol. 9(4), pages 471-489, December.
    5. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    6. Lichtenberg, Frank R. & Pottelsberghe de la Potterie, Bruno v., 1998. "International R&D spillovers: A comment," European Economic Review, Elsevier, vol. 42(8), pages 1483-1491, September.
    7. Elhanan Helpman & David T. Coe, 1993. "International RandD Spillovers," IMF Working Papers 93/84, International Monetary Fund.
    8. David T. Coe & Willy W. Hoffmaister, 1999. "Are There International R&D Spillovers Among Randomly Matched Trade Partners? A Response to Keller," IMF Working Papers 99/18, International Monetary Fund.
    9. Schiff, Maurice, 2001. "Will the Real “Natural Trading Partner” Please Stand Up?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 245-261.
    10. Michaely, Michael, 1998. "Partners to a preferential trade agreement: Implications of varying size," Journal of International Economics, Elsevier, vol. 46(1), pages 73-85, October.
    11. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-570, August.
    12. Schiff, Maurice & Wang, Yanling & Olarreaga, Marcelo, 2002. "Trade-related technology diffusion and the dynamics of North-South and South-South integration," Policy Research Working Paper Series 2861, The World Bank.
    13. Pravin Krishna, 2003. "Are Regional Trading Partners "Natural"?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 202-231, February.
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    Cited by:

    1. Alberto Behar & Laia Cirera-i-Crivillé, 2013. "Does it Matter Who You Sign With? Comparing the Impacts of North–South and South–South Trade Agreements on Bilateral Trade," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 765-782, September.

    More about this item

    Keywords

    North-South technology diffusion; productivity; regional integration; natural trading partners; Korea; Mexico;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O39 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Other

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