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Technology Trade in Economic Development

Recent evidence on the respective contributions of institutions and trade to income levels across countries has demonstrated that – once endogeneity is considered – institutional quality clearly dominates the effect of trade. We argue that overall trade is not the most appropriate measure for technology diffusion as a source of productivity growth and propose to focus on imports of research and development (R&D) intensive goods instead. Overall, we confirm previous findings that institutions matter most and that overall trade is not positively associated with per-capita income levels. Yet this does not hold for technology trade, as there is a positive and significant linkage between technology imports and income levels. This outcome is robust to various model specifications, including an instrumental variable approach.

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Paper provided by Universitat de les Illes Balears, Departament d'Economía Aplicada in its series DEA Working Papers with number 22.

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Date of creation: 2006
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Handle: RePEc:ubi:deawps:22
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