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Trade Patterns and International Technology Spillovers:Theory and Evidence from Patent Citations

  • Naoto Jinji
  • Xingyuan Zhang
  • Shoji Haruna

In this paper, we develop a two-country model of monopolistic competition with quality differentiation by extending the model of Melitz and Ottaviano (2008) and examine the relationship between the bilateral trade structure and international technology spillovers. We show that bilateral trade patterns and the extent of technology spillovers will change, depending on the technology gap between two countries. We then test predictions of the model by using bilateral trade data among 44 countries and patent citation data at the U.S., European, and Japanese Patent Offices. We use patent citations as a proxy for spillovers of technological knowledge. Trade patterns are categorized into three types: one-way trade (OWT), horizontal intra-industry trade (HIIT), and vertical intra-industry trade (VIIT). Each of OWT and VIIT is further divided into two subcategories, based on the direction of trade. We find that intra-industry trade plays a significant role in technology spillovers. In particular, HIIT is associated with larger technology spillovers than VIIT, which confirms the predictions of the model.

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Paper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-10-006.

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Length: 38 pages
Date of creation: Oct 2010
Date of revision: Mar 2011
Handle: RePEc:kue:dpaper:e-10-006
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