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North-South Technology Diffusion, Regional Integration, and the Dynamics of the “Natural Trading Partners” Hypothesis

  • Schiff, Maurice


    (World Bank)

  • Wang, Yanling


    (Carleton University)

Based on static analysis, a number of studies argue that forming a 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 TFP in Korea, Mexico and Poland. Using industry-level data, we show that i) technology diffusion and productivity gains tend to be regional: Korea (Mexico) (Poland) benefits mainly from trade with Japan (North America) (the EU); and ii) the dynamic version of the “natural trading partners” hypothesis seems to hold for Korea and Mexico though not necessarily for Poland.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1384.

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Length: 24 pages
Date of creation: Nov 2004
Date of revision:
Publication status: published in: Revue d'économie du développement, 2007, 21 (5), 69-84
Handle: RePEc:iza:izadps:dp1384
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  1. 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.
  2. Schiff, Maurice, 1999. "Will the real"natural trading partner"please stand up?," Policy Research Working Paper Series 2161, The World Bank.
  3. David T. Coe & Elhanan Helpman, 1993. "International R&D Spillovers," NBER Working Papers 4444, National Bureau of Economic Research, Inc.
  4. Wolfgang Keller, 1996. "Are International R&D Spillovers Trade-related? Analyzing Spillovers among Randomly Matched Trade Partners," International Trade 9608002, EconWPA.
  5. Lumenga-Neso, Olivier & Olarreaga, Marcelo & Schiff, Maurice, 2001. "On 'Indirect' Trade-Related R&D Spillovers," CEPR Discussion Papers 2871, C.E.P.R. Discussion Papers.
  6. 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.
  7. 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.
  8. 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 537-70, August.
  9. 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.
  10. 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.
  11. Elhanan Helpman & David T. Coe, 1993. "International RandD Spillovers," IMF Working Papers 93/84, International Monetary Fund.
  12. Pravin Krishna, 2003. "Are Regional Trading Partners "Natural"?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 202-231, February.
  13. David T. Coe & Alexander 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.
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