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Can Trade Really Hurt? An Empirical Follow-up on Samuelson’s Controversial Paper

  • Jurgen Bitzer
  • Holger Görg
  • Philipp J.H. Schröder

This paper investigates Samuelson's (JEP, 2004) argument that technical progress of the trade partner may hurt the home country. We illustrate this prospect in a simple Ricardian model for situations with outward knowledge spillovers. Within this framework Samuelson's Act II effects may occur. Based on industry level panel data for seventeen OECD countries for the period 1973 to 2000 we show econometrically that the outflow of domestic knowledge via exports or FDI may have a negative impact on industry output in the home country. This is particularly so when exporting to technologically less advanced countries and, more specifically, China..

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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 08/34.

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Handle: RePEc:not:notgep:08/34
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  1. Keller, Wolfgang, 2002. "International Technology Diffusion," CEPR Discussion Papers 3133, C.E.P.R. Discussion Papers.
  2. Beata K. Smarzynska, 2003. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages," William Davidson Institute Working Papers Series 548, William Davidson Institute at the University of Michigan.
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  9. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
  10. 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.
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  18. Philipp J. H. Schröder, 2007. "Cartel Stability and Economic Integration," Review of International Economics, Wiley Blackwell, vol. 15(2), pages 313-320, 05.
  19. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
  20. Gomory, Ralph E. & Baumol, William J., 1997. "Productivity differences, world-market shares and conflicting national interests in linear trade models," Japan and the World Economy, Elsevier, vol. 9(2), pages 123-150, May.
  21. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, June.
  22. Bruno Van Pottelsberghe & Frank Lichtenberg, 1998. "International R&D spillovers comment," ULB Institutional Repository 2013/6233, ULB -- Universite Libre de Bruxelles.
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  24. Daniel Gros, 1987. "Protectionism in a Framework with Intra-Industry Trade: Tariffs, Quotas, Retaliation, and Welfare Losses (Le protectionnisme dans un cadre faisant intervenir les échanges de produits analogues: droit," IMF Staff Papers, Palgrave Macmillan, vol. 34(1), pages 86-114, March.
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