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Weightless machines and costless knowledge - an empirical analysis of trade and technology diffusion

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  • Barba Navaretti, Giorgio
  • Soloaga, Isidro

Abstract

The authors examine the impact on productivity of technologies imported by a sample of developing, and transition economies in Central and Easter Europe, and the Southern Mediterranean - economies becoming increasingly integrated with the European Union. They depart from earlier studies of technology diffusion by focusing on the technology embodied in the machines imported. Earlier work focused mostly on spillovers from foreign research, and development conveyed through trade, without controlling for the characteristics of the goods imported. The authors jointly estimate the choice of foreign technology, and its impact on domestic productivity for a set of manufacturing sectors. They proxy the technological level of the machines imported, by using an index relating the unit value of the machines imported by a given country, to the unit value of similar machines imported by the United States. At any point in time between 1989 and 1997, there is a persistent (even increasing) gap between the unit values of the machines imported by the United States, and those imported by the sample of developing countries. Although developing economies buy increasingly productive machines, the technology embodied in the machines persistently lags behind that in the machines purchased by the United States - so far as unit values are good proxies of embodied technologies. The authors also find that productivity growth in manufacturing, depends on the types of machines imported in a given industry. So although the optimal choice for developing countries is to buy cheaper, less sophisticated machines, given local skills and factor prices, this choice has a cost in long-run productivity growth. If productivity is low, countries buy low-technology machines, but doing so keeps them in a low-technology, low-growth trap.

Suggested Citation

  • Barba Navaretti, Giorgio & Soloaga, Isidro, 2001. "Weightless machines and costless knowledge - an empirical analysis of trade and technology diffusion," Policy Research Working Paper Series 2598, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2598
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    Cited by:

    1. Paolo Epifani, 2003. "Trade liberalization, Firm Performances and Labor Market Outcomes in the Developing World, what Can We Learn From Micro-Level Data?," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 455-486.
    2. Meschi, Elena & Vivarelli, Marco, 2007. "Globalization and Income Inequality," IZA Discussion Papers 2958, Institute for the Study of Labor (IZA).
    3. Habi Yaremye, Alexis, 2008. "Economic Proximity and Technology Flows: South Africa?s Influence and the Role of Technological Interaction in Botswana?s Diversification Effort," WIDER Working Paper Series 092, World Institute for Development Economic Research (UNU-WIDER).
    4. Li, Yao Amber, 2014. "Borders and distance in knowledge spillovers: Dying over time or dying with age?—Evidence from patent citations," European Economic Review, Elsevier, vol. 71(C), pages 152-172.
    5. MacDonald, Ronald & Majeed, Muhammad Tariq, 2010. "Distributional and Poverty Consequences of Globalization: A Dynamic Comparative Analysis for Developing Countries," SIRE Discussion Papers 2010-62, Scottish Institute for Research in Economics (SIRE).
    6. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, vol. 37(2), pages 287-302, February.
    7. Adriana Peluffo & Dayna Zaclicever, 2013. "Imported Intermediates and Productivity: Does Absorptive Capacity Matter? A Firm-Level Analysis for Uruguay," Documentos de Trabajo (working papers) 0613, Department of Economics - dECON.
    8. Alexis Habiyaremye & Thomas H. W. Ziesemer, 2012. "Export demand elasticities and productivity as determinants of growth: estimates for Mauritius," Applied Economics, Taylor & Francis Journals, vol. 44(9), pages 1143-1158, March.
    9. Habiyaremye, Alexis & Ziesemer, Thomas, 2008. "Export Demand Elasticities as Determinants of Growth: Estimates for Mauritius," MERIT Working Papers 072, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Eric Rasmusen, 2007. "A Reputation Model of Quality in North-South Trade," Working Papers 2007-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    11. Rasmusen, Eric, 2017. "A model of trust in quality and North–South trade," Research in Economics, Elsevier, vol. 71(1), pages 159-170.
    12. Alexis Habiyaremye, 2013. "Imported Capital Goods and Manufacturing Productivity: Evidence from Botswana's Manufacturing Sector," South African Journal of Economics, Economic Society of South Africa, vol. 81(4), pages 581-604, December.

    More about this item

    Keywords

    Environmental Economics&Policies; Labor Policies; Banks&Banking Reform; Economic Theory&Research; General Technology; Banks&Banking Reform; Environmental Economics&Policies; Economic Theory&Research; General Technology; ICT Policy and Strategies;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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