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Technology spillovers embodied in international trade: Intertemporal, regional and sectoral effects in a global CGE framework

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  • Ramiro Parrado
  • Enrica De Cian

Abstract

International technology spillovers can be categorised in two types: disembodied and embodied. Disembodied international technology spillovers are the flow of ideas that take place without the exchange of commodities. Examples of disembodied spillovers are present through workers’ mobility, students exchange programs, international conferences and journals. Embodied international technology spillovers are linked to the exchange of goods, particularly capital goods. The use of new equipment in the manufacturing and industrial sectors is considered an important source of technological progress and thus of economic growth. The degree of embodied technological spillovers is related to the level of capital imports, absorptive capacity, education, and knowledge stocks among other determinants. These in turn may depend on country specific policies. Trade within different classes of goods leads to different degrees of knowledge spillovers because technology intensity varies across sectors, leading to different degrees of embodied technology. Technology spillovers are neither automatic nor costless but they require adoption capabilities, e.g. human capital and indigenous research capacity. The absorptive capacity of a country is related to its economic, human, and technological development. This paper analyses the relationship between trade, technology, and the environment using a multi-sector and multi-region dynamic recursive CGE model. In this context, the main objectives of the paper are: i) to include endogenous factor-biased technical change based on trade flows in a CGE model, particularly for energy and capital, ii) to analyse the implications of specific spillovers embodied in trade of capital goods (machinery and equipment), and iii) to highlight the implications of accounting for indirect effects induced by spillovers. The paper models embodied spillovers based on international trade of capital goods. The main vehicles of spillovers are machinery and equipment (M&E) commodities. In particular, we consider the endogenous relationship between M&E imports and energy-biased technical change as well as capital-biased technical change. Estimates of the factor-biased technical change due to capital goods imports are drawn from Carraro and De Cian (2012). The model has been calibrated taking into account the influence of machinery and equipment imports only in capital and energy-biased technical change. This study takes advantage of a global trade database to implement spillovers by specifying technology source and destination regions. This allows modelling trade-embodied knowledge transfers in order to analyse the net effects of climate policy both in developed (technology source) and developing (technology recipient) regions. We find that explicitly modelling trade spillovers reveals significant effects thanks to the transmission mechanisms underlying imports of capital commodities. We then assess the net contribution of modelling trade spillovers within three policy scenarios. The aggregated net effects of spillovers are rather small confirming findings from previous studies. However, we identified important international and intersectoral redistribution effects due to technology transfers represented as embodied spillovers.

Suggested Citation

  • Ramiro Parrado & Enrica De Cian, 2013. "Technology spillovers embodied in international trade: Intertemporal, regional and sectoral effects in a global CGE framework," EcoMod2013 5426, EcoMod.
  • Handle: RePEc:ekd:004912:5426
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    Cited by:

    1. Jin, Wei & Zhang, ZhongXiang, 2016. "On the mechanism of international technology diffusion for energy technological progress," Resource and Energy Economics, Elsevier, vol. 46(C), pages 39-61.
    2. Lorenza Campagnolo & Carlo Carraro & Marinella Davide & Fabio Eboli & Elisa Lanzi & Ramiro Parrado, 2016. "Can climate policy enhance sustainability?," Climatic Change, Springer, vol. 137(3), pages 639-653, August.
    3. Cai, Yiyong & Newth, David & Finnigan, John & Gunasekera, Don, 2015. "A hybrid energy-economy model for global integrated assessment of climate change, carbon mitigation and energy transformation," Applied Energy, Elsevier, vol. 148(C), pages 381-395.
    4. Zuzana Smeets Kristkova & Edward Smeets & Hans van Meijl, 2016. "Agricultural R&D investments, biofuel policy and food security – a CGE analysis," EcoMod2016 9966, EcoMod.
    5. Jin, Wei, 2015. "Can China harness globalization to reap domestic carbon savings? Modeling international technology diffusion in a multi-region framework," China Economic Review, Elsevier, vol. 34(C), pages 64-82.
    6. Wei Jin & ZhongXiang Zhang, 2014. "On the Mechanism of International Technology Diffusion for Energy Productivity Growth," Working Papers 2014.40, Fondazione Eni Enrico Mattei.
    7. repec:gam:jsusta:v:9:y:2017:i:6:p:946-:d:100442 is not listed on IDEAS
    8. James Lennox & Ramiro Parrado, 2015. "Capital-embodied Technologies in CGE Models," Working Papers 2015.02, Fondazione Eni Enrico Mattei.
    9. Wan, Jun & Baylis, Kathy & Mulder, Peter, 2015. "Trade-facilitated technology spillovers in energy productivity convergence processes across EU countries," Energy Economics, Elsevier, vol. 48(C), pages 253-264.
    10. Claudio Baccianti & Andreas Löschel, 2014. "The Role of Product and Process Innovation in CGE Models of Environmental Policy," WWWforEurope Working Papers series 68, WWWforEurope.
    11. repec:era:chaptr:2015-rpr-23-2 is not listed on IDEAS
    12. Jin, Wei, 2016. "International technology diffusion, multilateral R&D coordination, and global climate mitigation," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 357-372.
    13. Weiwei Liu & Xiandong Xu & Zhile Yang & Jianyu Zhao & Jing Xing, 2016. "Impacts of FDI Renewable Energy Technology Spillover on China’s Energy Industry Performance," Sustainability, MDPI, Open Access Journal, vol. 8(9), pages 1-16, August.
    14. Wei Jin & ZhongXiang Zhang, 2014. "Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter?," Working Papers 2014.18, Fondazione Eni Enrico Mattei.
    15. Ponce, Roberto & Parrado, Ramiro & Stehr, Alejandra & Bosello, Francesco, 2016. "Climate Change, Water Scarcity in Agriculture and the Economy-Wide Impacts in a CGE Framework," EIA: Climate Change: Economic Impacts and Adaptation 251813, Fondazione Eni Enrico Mattei (FEEM).
    16. repec:eee:enepol:v:110:y:2017:i:c:p:51-61 is not listed on IDEAS
    17. Dolphin, G. & Pollitt, M., 2018. "International Spillovers and Carbon Pricing Policies," Cambridge Working Papers in Economics 1803, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    Multi-region and Multi-sector model; Energy and environmental policy; General equilibrium modeling;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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