IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/19249.html
   My bibliography  Save this paper

Quid Pro Quo: Technology Capital Transfers for Market Access in China

Author

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

Abstract

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. "Quid Pro Quo: Technology Capital Transfers for Market Access in China," NBER Working Papers 19249, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19249
    Note: EFG IFM PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w19249.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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. James R. Markusen, 2021. "Contracts, intellectual property rights, and multinational investment in developing countries," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 8, pages 159-174, World Scientific Publishing Co. Pte. Ltd..
    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)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas J. Holmes & Ellen R. McGrattan & Edward C. Prescott, 2011. "Technology capital transfer," Working Papers 687, Federal Reserve Bank of Minneapolis.
    2. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    3. Lin, Hwan C., 2010. "Technology diffusion and global welfare effects: Imitative R&D vs. South-bound FDI," Structural Change and Economic Dynamics, Elsevier, vol. 21(4), pages 231-247, November.
    4. Olena Ivus & Walter Park & Kamal Saggi, 2016. "Intellectual Property Protection And The Industrial Composition Of Multinational Activity," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1068-1085, April.
    5. Keith E. MASKUS & Lei YANG, 2013. "The Impacts of Post-TRIPS Patent Reforms on the Structure of Exports," Discussion papers 13030, Research Institute of Economy, Trade and Industry (RIETI).
    6. Howell, Sabrina T., 2018. "Joint ventures and technology adoption: A Chinese industrial policy that backfired," Research Policy, Elsevier, vol. 47(8), pages 1448-1462.
    7. Kukharskyy, Bohdan, 2020. "A tale of two property rights: Knowledge, physical assets, and multinational firm boundaries," Journal of International Economics, Elsevier, vol. 122(C).
    8. Klein, Michael A, 2020. "Trade Secret Protection in a Developing Economy," MPRA Paper 103360, University Library of Munich, Germany.
    9. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563, Elsevier.
    10. Lin, Jenny X. & Lincoln, William F., 2017. "Pirate's treasure," Journal of International Economics, Elsevier, vol. 109(C), pages 235-245.
    11. Joel Rodrigue, 2014. "Multinational Production, Exports and Aggregate Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 243-261, April.
    12. Rajnish Mehra & John Donaldson & Christos Koulovatianos & Jian Li, 2018. "Demographics and FDI: Lessons from China’s One-Child Policy," NCAER Working Papers 112, National Council of Applied Economic Research.
    13. Nagano, Mamoru, 2013. "Similarities and differences among cross-border M&A and greenfield FDI determinants: Evidence from Asia and Oceania," Emerging Markets Review, Elsevier, vol. 16(C), pages 100-118.
    14. Nemlioglu, Ilayda & Mallick, Sushanta, 2020. "Does multilateral lending aid capital accumulation? Role of intellectual capital and institutional quality," Journal of International Money and Finance, Elsevier, vol. 108(C).
    15. Gelb, Alan & Meyer, Christian J. & Ramachandran, Vijaya, 2014. "Development as diffusion: Manufacturing productivity and sub-Saharan Africa's missing middle," WIDER Working Paper Series 042, World Institute for Development Economic Research (UNU-WIDER).
    16. Michael Peters, 2020. "Heterogeneous Markups, Growth, and Endogenous Misallocation," Econometrica, Econometric Society, vol. 88(5), pages 2037-2073, September.
    17. Nabokin, Tatjana, 2014. "Global Investment Decisions and Patent Protection: Evidence from German Multinationals," Discussion Papers in Economics 21266, University of Munich, Department of Economics.
    18. Keith E. Maskus & Lei Yang, 2018. "Domestic patent rights, access to technologies and the structure of exports," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(2), pages 483-509, May.
    19. Uday Bhanu Sinha, 2001. "Patent Protection, Innovation Rate and Welfare," Departmental Working Papers wp0106, National University of Singapore, Department of Economics.
    20. Glass, Amy Jocelyn & Saggi, Kamal, 2002. "Intellectual property rights and foreign direct investment," Journal of International Economics, Elsevier, vol. 56(2), pages 387-410, March.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:nbr:nberwo:19249. 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: . General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    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.