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Trade Patterns, Technology Flows, and Productivity Growth

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  • Wolfgang Keller

    (University of Wisconsin-Madison)

Abstract

This paper presents a model of international trade in differentiated intermediate goods. Because intermediates are invented through costly R&D investments, employing foreign intermediates implies sharing the return to R&D with the inventor country. I first derive a relation of how domestic productivity is related to foreign R&D investments. In the subsequent empirical analysis, industry level data for eight OECD countries between 1970-91 is used to estimate that relation. The robustness of interpreting empirical findings is emphasized, to which effect I employ Monte-Carlo techniques, and the part of international R&D spillovers that is related to trade is quantified. I find evidence, first, that domestic and foreign R&D affect productivity differently, in contrast to assuming symmetric effects. Second, the productivity effects resulting from R&D vary substantially by which country conducts the R&D. Third, I find that the composition of a country's import partners does not significantly affect the estimated effect from foreign R&D, indicating a large component in the benefit from foreign R&D which is not related to trade. Lastly, I estimate that international trade contributes about 20% to the total productivity effect from foreign R&D.

Suggested Citation

  • Wolfgang Keller, 1997. "Trade Patterns, Technology Flows, and Productivity Growth," International Trade 9702001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpit:9702001
    Note: Type of Document - Tex; prepared on IBM PC - PC-TEX; to print on HP and PostScript; pages: 18; figures: request from author
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    References listed on IDEAS

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    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    2. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    3. 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.
    4. Keller, Wolfgang, 2002. "Trade and the Transmission of Technology," Journal of Economic Growth, Springer, vol. 7(1), pages 5-24, March.
    5. Nadiri, M.I., 1993. "Innovations and Technological Spillovers," Working Papers 93-31, C.V. Starr Center for Applied Economics, New York University.
    6. Rivera-Batiz, Luis A. & Romer, Paul M., 1991. "International trade with endogenous technological change," European Economic Review, Elsevier, vol. 35(4), pages 971-1001, May.
    7. Frank Lichtenberg & Bruno van Pottelsberghe de la Potterie, 1996. "International R&D Spillovers: A Re-Examination," NBER Working Papers 5668, National Bureau of Economic Research, Inc.
    8. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
    9. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc.
    10. Coe, David T & Helpman, Elhanan & Hoffmaister, Alexander W, 1997. "North-South R&D Spillovers," Economic Journal, Royal Economic Society, vol. 107(440), pages 134-149, January.
    11. Park, Walter G, 1995. "International R&D Spillovers and OECD Economic Growth," Economic Inquiry, Western Economic Association International, vol. 33(4), pages 571-591, October.
    12. Jeffrey I. Bernstein & Pierre Mohnen, 1994. "International R & D Spillovers between U.S. and Japanese R & D intensive sectors," Cahiers de recherche du Département des sciences économiques, UQAM 9406, Université du Québec à Montréal, Département des sciences économiques.
    13. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
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    Citations

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    Cited by:

    1. Dan Ben-David & Ayal Kimhi, 2001. "Trade and the rate of income convergence," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(4), pages 419-441.
    2. Engelbrecht, Hans-Jurgen, 1998. "A communication perspective on the international information and knowledge system," Information Economics and Policy, Elsevier, vol. 10(3), pages 359-367, September.
    3. 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.
    4. Hartmut Egger & Peter Egger, 2006. "International Outsourcing and the Productivity of Low-Skilled Labor in the EU," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 98-108, January.
    5. Hans-Jurgen Engelbrecht, 2002. "Human capital and international knowledge spillovers in TFP growth of a sample of developing countries: an exploration of alternative approaches," Applied Economics, Taylor & Francis Journals, vol. 34(7), pages 831-841.
    6. Peter Egger & Michael Pfaffermayr, 2001. "A note on labour productivity and foreign inward direct investment," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 229-232.
    7. Richard E. Baldwin & Rikard Forslid, 1998. "Incremental Trade and Endogenous Growth: A q-Theory Approach," NBER Working Papers 6477, National Bureau of Economic Research, Inc.
    8. Thanh Le, 2008. "'Brain Drain' Or 'Brain Circulation': Evidence From Oecd'S International Migration And R&D Spillovers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(5), pages 618-636, November.
    9. Baldwin, Richard E. & Forslid, Rikard, 1999. "Incremental trade policy and endogenous growth:: A q-theory approach," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 797-822, April.

    More about this item

    Keywords

    International R&D Spillovers; Intermediate Goods Trade; Embodied Technological Change Monte-Carlo Estimation;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F2 - International Economics - - International Factor Movements and International Business
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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