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Technology Transfer Through Trade

  • Mombert Hoppe

    (DG Development, European Commission)

This paper examines the role that trade plays in economic development through the channel of technology transfer, approximated by total factor productivity. Three strains of factors influence the process of technology transfer; direct effort that is taken to transfer technologies, the capacity to adopt technologies, and differences in the underlying conditions between donor- and receiving countries. In this context, trade in (capital) goods allows technology import and improved input decisions. Second, trade opens export markets, allowing learning-by-doing. Third and most importantly, trade increases the set of accessible technologies, increasing the scope for imitation. The theoretical insights are compared to the empirical literature that deals with trade and technology transfer. Not surprisingly, it turns out that openness and human capital have a positive influence on the transfer of technology. Yet methodological problems with the data weaken the practical significance of the results, especially as the precise and fundamental mechanism of spillovers and the factors that condition the degree of technology transfer are not profoundly illuminated. These underlying processes have to be better understood in order to be able to give valuable policy recommendations that will go beyond the general advice of increasing openness and human capital formation.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.19.

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Date of creation: Jan 2005
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Handle: RePEc:fem:femwpa:2005.19
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  1. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
  2. Slavo Radosevic, 1999. "International Technology Transfer and Catch-Up in Economic Development," Books, Edward Elgar Publishing, number 1386, 10.
  3. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 641-680.
  4. Xu, Bin, 2000. "Trade, FDI, and International Technology Diffusion," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 585-601.
  5. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
  6. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  7. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
  8. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  9. Teece, David J, 1977. "Technology Transfer by Multinational Firms: The Resource Cost of Transferring Technological Know-how," Economic Journal, Royal Economic Society, vol. 87(346), pages 242-61, June.
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