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Regional integration and technology diffusion : the case of the North America free trade agreement

Author

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  • Schiff,Maurice
  • Wang, Yanling

Abstract

The literature on regional integration agreements (RIAs) is vast and deals with political, economic, and political economy issues. The literature on the economics of RIAs deals mostly with static effects, and concludes that these effects are, in general, ambiguous. So far there has been no empirical analysis of the dynamic effects of RIAs based on their impact on technology diffusion from partner and nonpartner countries. Schiff and Wang's paper is a first attempt in this direction. The authors examine the impact of the North America Free Trade Agreement (NAFTA) on total factor productivity in Mexico through its impact on trade-related technology transfers from OECD countries. They estimate trade-related technology diffusion by using a measure of trade-related foreign research and development (R&D). Foreign R&D is constructed based on industry-specific R&D in the OECD, OECD-Mexico trade patterns, and input-output relations in Mexico. The authors find that: Mexico's trade with its NAFTA partners had a large and significant impact on Mexico's total factor productivity, while trade with the rest of the OECD did not. Simulating the impact of NAFTA has led to a permanent increase in total factor productivity in Mexico's manufacturing sector of between 5.5 percent and 7.5 percent and to some convergence with the economies of Canada and the United States.

Suggested Citation

  • Schiff,Maurice & Wang, Yanling, 2003. "Regional integration and technology diffusion : the case of the North America free trade agreement," Policy Research Working Paper Series 3132, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3132
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    3. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "A North American Free Trade Agreement: Analytical Issues and a Computational Assessment," World Scientific Book Chapters,in: Globalization And International Trade Policies, chapter 12, pages 393-424 World Scientific Publishing Co. Pte. Ltd..
    4. 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.
    5. Schiff, Maurice & Winters, L Alan, 1998. "Regional Integration as Diplomacy," World Bank Economic Review, World Bank Group, vol. 12(2), pages 271-295, May.
    6. Linda Hunter & James R. Markusen & Thomas F. Rutherford, 1992. "US-Mexico Free Trade and the North American Auto Industry: Effects on the Spatial Organisation of Production of Finished Autos," The World Economy, Wiley Blackwell, vol. 15(1), pages 65-82, January.
    7. repec:fth:michin:289 is not listed on IDEAS
    8. Lumenga-Neso, Olivier & Olarreaga, Marcelo & Schiff, Maurice, 2001. "On"indirect"trade-related research and development spillovers," Policy Research Working Paper Series 2580, The World Bank.
    9. Roland-Holst, David & Reinert, Kenneth A. & Shiells, Clinton R., 1994. "NAFTA liberalization and the role of nontariff barriers," The North American Journal of Economics and Finance, Elsevier, vol. 5(2), pages 137-168.
    10. Olarreaga, Marcelo & Schiff, Maurice & Wang, Yanling, 2003. "North-South and South-South Trade-Related Technology Diffusion: An Industry Level Analysis," CEPR Discussion Papers 3711, C.E.P.R. Discussion Papers.
    11. Maurice Schiff & L. Alan Winters, 2003. "Regional Integration and Development," World Bank Publications, The World Bank, number 15172.
    12. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-570, August.
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    Citations

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    Cited by:

    1. Caudillo Sanchez, Francisco, 2006. "Is information and communication technology (ICT) the right strategy for growth in Mexico?," Freiberg Working Papers 2006,17, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    2. Voicu, Alexandru, 2008. "Adding Rungs to the Exporting Ladder: Plant-Level Exporting Dynamics and Total Factor Productivity Growth," IZA Discussion Papers 3807, Institute for the Study of Labor (IZA).
    3. Angel Calderon-Madrid & Alexandru Voicu, 2011. "The NAFTA tide: Lifting the larger and better boats," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(4), pages 467-505.

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