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Human capital, trade and long-run productivity. Testing the technological absorption hypothesis for the Portuguese economy, 1960-2001

  • Aurora A.C. Teixeira

    ()

    (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto)

  • Natércia Fortuna

    ()

    (CEMPRE, Faculdade de Economia do Porto, Universidade do Porto)

An important characteristic of the role of foreign trade in the technological catch-up of countries is the complementary nature of technological change and human capital formation. In this context, the level of education is likely to have a crucial impact on total factor productivity because it determines the capacity of an economy to carry out technological innovation, and to adopt and to implement efficiently technology from abroad. However, the role of human capital as a pre requisite for technology absorption although theoretically acknowledged has been empirically neglected. One of the main problems with empirical studies in this domain is that they do not clearly test the mechanisms through which trade, namely the import of capital goods, affects total factor productivity or, roughly the level of technological development of a given country. Through cointegration techniques, we demonstrate the relevance of the technological absorption hypothesis. We show that the interaction between human capital and (lagged) machinery imports – that is, the technological absorption capability - is the most critical determinant of Portuguese long-run total factor productivity.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 226.

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Length: 31 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:por:fepwps:226
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