International Trade, Technology Diffusion, and the Role of Diffusion Barriers
This paper assesses the welfare impact of trade and technology diffusion as well as the change in the cross-country distribution of GDP due to removal of trade costs and diffusion barriers. The model extends the multi-country Ricardian trade model of Alvarez and Lucas (2007) to include technology diffusion with diffusion barriers. A key feature of the model is that some countries export goods produced by foreign technology via diffusion. The model is calibrated to match the world GDP distribution, the merchandise trade and technology diffusion shares of GDP, and real GDP per capita for a sample of 31 countries. Data on international trade in royalties, license fees, and information intensive services are used as proxies for international technology diffusion. There are three key findings. First, the welfare gains from removing diffusion barriers are 4--60% across countries, generally larger than the gains from removing trade costs (8--40%). The main reason is that diffusion has a larger impact on the nontradable sector due to the substitutability between trade and diffusion in the tradable sector. Another reason is that diffusion barriers are generally larger than trade costs. Second, removing trade costs and diffusion barriers has little impact on reducing the dispersion of real GDP per capita (measured by Gini index) across countries. Compared to the benchmark, free diffusion decreases the Gini by 4%, and free trade decreases the Gini by 2%. Third, removing diffusion barriers increases trade, which indicates that diffusion may enhance trade.
|Date of creation:||01 Jan 2010|
|Date of revision:||01 Dec 2011|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Giovanni Peri, 2005. "Determinants of Knowledge Flows and Their Effect on Innovation," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 308-322, May.
- Eaton, Jonathan & Kortum, Samuel, 1996.
"Trade in ideas Patenting and productivity in the OECD,"
Journal of International Economics,
Elsevier, vol. 40(3-4), pages 251-278, May.
- Jonathan Eaton & Samuel Kortum, 1995. "Trade in Ideas: Patenting and Productivity in the OECD," NBER Working Papers 5049, National Bureau of Economic Research, Inc.
- Eaton, J. & Kortum, S., 1995. "Trade in Ideas: Patenting and Productivity onn the OECD," Papers 34, Boston University - Department of Economics.
- Samuel Kortum & Jonathan Eaton, 1995. "Trade in ideas: patenting and productivity in the OECD," Finance and Economics Discussion Series 95-9, Board of Governors of the Federal Reserve System (U.S.).
- Wolfgang Keller & Stephen R. Yeaple, 2009.
"The Gravity of Knowledge,"
NBER Working Papers
15509, National Bureau of Economic Research, Inc.
- Bridgman, Benjamin R. & Livshits, Igor D. & MacGee, James C., 2007. "Vested interests and technology adoption," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 649-666, April.
- Natalia Ramondo & Andrés Rodríguez-Clare, 2013.
"Trade, Multinational Production, and the Gains from Openness,"
Journal of Political Economy,
University of Chicago Press, vol. 121(2), pages 273 - 322.
- Natalia Ramondo & Andrés Rodríguez-Clare, 2009. "Trade, Multinational Production, and the Gains from Openness," NBER Working Papers 15604, National Bureau of Economic Research, Inc.
- Andres Rodriguez-Clare & Natalia Ramondo, 2007. "Trade, Multinational Production, and the Gains from Openness," 2007 Meeting Papers 819, Society for Economic Dynamics.
- Breinlich, Holger & Criscuolo, Chiara, 2010.
"International Trade in Services: A Portrait of Importers and Exporters,"
CEPR Discussion Papers
7837, C.E.P.R. Discussion Papers.
- Breinlich, Holger & Criscuolo, Chiara, 2011. "International trade in services: A portrait of importers and exporters," Journal of International Economics, Elsevier, vol. 84(2), pages 188-206, July.
- Diego Comin & Bart Hobijn & Emilie Rovito, 2006. "Five Facts You Need to Know About Technology Diffusion," NBER Working Papers 11928, National Bureau of Economic Research, Inc.
- Irarrazabal, Alfonso & Moxnes, Andreas & Opromolla, Luca David, 2009.
"The Margins of Multinational Production and the Role of Intra-firm trade,"
CEPR Discussion Papers
7145, C.E.P.R. Discussion Papers.
- Alfonso Irarrazabal & Andreas Moxnes & Luca David Opromolla, 2013. "The Margins of Multinational Production and the Role of Intrafirm Trade," Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 74 - 126.
- Fernando Alvarez & Robert E. Lucas, 2005.
"General Equilibrium Analysis of the Eaton-Kortum Model of International Trade,"
NBER Working Papers
11764, National Bureau of Economic Research, Inc.
- Alvarez, Fernando & Lucas, Robert Jr., 2007. "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1726-1768, September.
- Natalia Ramondo & Andrés Rodríguez-Clare, 2010. "Growth, Size, and Openness: A Quantitative Approach," American Economic Review, American Economic Association, vol. 100(2), pages 62-67, May.
- Jonathan Eaton & Samuel Kortum, 2006. "Innovation, Diffusion, and Trade," NBER Working Papers 12385, National Bureau of Economic Research, Inc.
- Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007.
"Estimating Trade Flows: Trading Partners and Trading Volumes,"
NBER Working Papers
12927, National Bureau of Economic Research, Inc.
- Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39409. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.