IDEAS home Printed from
   My bibliography  Save this paper

Technical appendix for quid pro quo: Technology capital transfers for market access in China


  • Thomas J. Holmes
  • Ellen R. McGrattan
  • Edward C. Prescott


Despite the recent rapid development and greater openness of China’s economy, FDI flows between China and technologically advanced countries are relatively small in both directions. We assess global capital flows in light of China’s quid pro quo policy of exchanging market access for transfers of technology capital—accumulated know-how such as research and development (R&D) that can be used in multiple production locations. We first provide empirical evidence of this policy and then incorporate it into a multicountry dynamic general equilibrium model. This extension leads to a significantly better fit of the model to data. We also find large welfare gains for China—and welfare losses for its FDI partners—from quid pro quo.

Suggested Citation

  • Thomas J. Holmes & Ellen R. McGrattan & Edward C. Prescott, 2013. "Technical appendix for quid pro quo: Technology capital transfers for market access in China," Staff Report 487, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:487

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Linda Yueh & Linda Yueh & John Van Reenen, 2012. "Why has China grown so fast? The role of international technology transfer," Economics Series Working Papers 592, University of Oxford, Department of Economics.
    2. McGrattan, Ellen R. & Prescott, Edward C., 2009. "Openness, technology capital, and development," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2454-2476, November.
    3. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
    4. Branstetter, Lee & Fisman, Ray & Foley, C. Fritz & Saggi, Kamal, 2011. "Does intellectual property rights reform spur industrial development?," Journal of International Economics, Elsevier, vol. 83(1), pages 27-36, January.
    5. Markusen, James R., 2001. "Contracts, intellectual property rights, and multinational investment in developing countries," Journal of International Economics, Elsevier, vol. 53(1), pages 189-204, February.
    6. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    7. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2015. "A Linder Hypothesis for Foreign Direct Investment," Review of Economic Studies, Oxford University Press, vol. 82(1), pages 83-121.
    8. Charles R. Hulten & Janet X. Hao, 2012. "The Role Of Intangible Capital in the Transformation and Growth of the Chinese Economy," NBER Working Papers 18405, National Bureau of Economic Research, Inc.
    9. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, vol. 55(1), pages 133-153, February.
    10. Galina Hale & Cheryl Long, 2011. "Are There Productivity Spillovers From Foreign Direct Investment In China?," Pacific Economic Review, Wiley Blackwell, vol. 16(2), pages 135-153, May.
    11. Hélène Dernis & Mosahid Khan, 2004. "Triadic Patent Families Methodology," OECD Science, Technology and Industry Working Papers 2004/2, OECD Publishing.
    12. repec:idb:brikps:9167 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Krammer, Sorin M.S., 2015. "Do good institutions enhance the effect of technological spillovers on productivity? Comparative evidence from developed and transition economies," Technological Forecasting and Social Change, Elsevier, vol. 94(C), pages 133-154.
    2. Aizenman, Joshua, 2015. "The internationalization of the RMB, capital market openness, and financial reforms in China," BOFIT Discussion Papers 4/2015, Bank of Finland, Institute for Economies in Transition.

    More about this item



    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:487. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jannelle Ruswick). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.