Journal of Economic Growth, 7, 5±24, 2002
2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
Trade and the Transmission of Technology
Department of Economics, University of Texas, BRB 3.152, Austin, TX 78712, USA NBER and CEPR
open economies. In this framework, technology in the form of product designs is transmitted to other industries,
both domestically as well as internationally, through trade in differentiated intermediate goods. I present
empirical results based on a new industry-level data set that covers more than 65 percent of the world's
research and development, productivity, international trade, international spillovers, inter-industry
F1, F2, O3
The international transmission of technological knowledge is important in shaping the
world's distribution of productivity. Technology that is transmitted widely creates a force
towards convergence across countries, whereas technological isolation favors divergence.
A strong level of technology transmission from one industry to another tends to equalize
productivity similarly. Instead, independent technological trajectories favor differences in
productivity across industries. This paper studies the importance of trade in advanced
intermediate goods for technology transmission across industries and countries. It has
major policy implications. First, it affects the optimal trade policy stance of a country.
Countries that have adopted relatively open trade regimes have often grown substantially
faster than more protectionist countries.
If trade transmits technological knowledge, this
might be an important reason for it. Second, if trade is an important mechanism of
progress will affect productivity largely according to the input±output- and foreign trade-
structure of the economy. Thus, the question has important implications for the
effectiveness of science and technology policies.
The theoretical framework that underlies this paper is provided by recent work on trade