Abstract
In this paper, all technology transfers are embodied in trade flows within a three-region, one-traded-commodity version of the GTAP model. Exogenous Hicks-Neutral technical progress in one region can have uneven impacts on productivity elsewhere. Why? Destination regions’ ability to harness new technology depends on their absorptive capacity and the structural congruence of the source and destination. Together with trade volume, these two factors determine the recipient’s spillover coefficient (which measures its success in capturing foreign technology). Armington competition between the outputs of the three economies and shifts in their terms of trade loom large in the general equilibrium adjustment.
Highlights
We implement embodied knowledge spillovers in a highly aggregated version of the GTAP model — that is, a one-traded-commodity, three-region version of GTAP.[1]
Working at the one-commodity level has the advantage of concentrating on interregional competition in the goods market without having to deal with the large amount of detail entailed in keeping track of inter-generic commodity substitution
The analysis is embedded in a setup where each region produces a traded Stuff along with a non-traded capital good
Summary
We implement embodied knowledge spillovers in a highly aggregated version of the GTAP model — that is, a one-traded-commodity, three-region version of GTAP.[1]. Each region produces one tradable good (its own type of Stuff) and one non-tradable (its own Capital Goods). It is necessary to include a non-tradable in each region because GTAP specifies that capital formation is supplied completely by a domestic industry which does not export. Various aggregations of the data are available, and in this paper a 3×3 aggregation of the database is the starting point from which a further aggregation is implemented to produce a three region macro model. Such a TFP shock is general output-augmenting by nature.
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