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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.

Suggested Citation

  • Schiff, Maurice & Wang, Yanling, 2004. "North-South Technology Diffusion, Regional Integration, and the Dynamics of the “Natural Trading Partners” Hypothesis," IZA Discussion Papers 1384, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1384

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    References listed on IDEAS

    1. 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.
    2. 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.
    3. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    4. 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.
    5. 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.
    6. Elhanan Helpman & David T. Coe, 1993. "International RandD Spillovers," IMF Working Papers 93/84, International Monetary Fund.
    7. 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.
    8. 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.
    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. 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.
    11. Pravin Krishna, 2003. "Are Regional Trading Partners "Natural"?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 202-231, February.
    12. 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.
    13. 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.
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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


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

    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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