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Trade Patterns, Technology Flows, and Productivity Growth: Any Relationship?

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  • Wolfgang Keller

    (University of Wisconsin-Madison)

Abstract

In this paper, I examine the relation of trade patterns, technology flows, and productivity growth; in particular, the hypothesis that foreign R&D investments which are transmitted through trade in intermediate inputs lead to domestic productivity gains. I derive several estimation equations where productivity growth is related to the growth of cumulative R&D stocks of a country's trade partners. The empirical analysis investigates this relation by simulating (Monte Carlo-style) counter factual trade patterns, and comparing the relation based on ''true'' trade patterns with the one obtained from simulated trade patterns. Among the findings: (1) I confirm earlier results showing that domestic productivity growth is positively affected by foreign countries R&D efforts. (2) There is strong evidence suggesting that the effects of trade-weighted foreign R&D vary significantly by partner country. (3) I present results which suggest that the observed trade patterns-cum-partner countries R&D investments have the predicted productivity effects. I show subsequently that this result needs to be qualified: the productivity effects do not rely on the partner countries' R&D investments and the import shares. Rather, differences in countries' R&D investments are insignificant in their effect on domestic productivity once the world's actual trade patterns are imposed.

Suggested Citation

  • Wolfgang Keller, 1996. "Trade Patterns, Technology Flows, and Productivity Growth: Any Relationship?," Working papers _008, University of Wisconsin - Madison.
  • Handle: RePEc:wop:wimahp:_008
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    File URL: http://www.econ.wisc.edu/~wolfgang/ps-papers/trpa.ps
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