Essays on technology and international trade

Abstract

The three essays contained in this dissertation are about technology and international trade. The first essay examines optimal intellectual property rights (IPR) protection in developing countries, while the other two estimate product quality at the sectoral level for a panel of twelve manufacturing sectors in twenty OECD countries using a novel approach and relate import competition and R&D investment to the growth of sectoral product quality. Chapter 2 is motivated by the work of Acemoglu and Zilibotti (2001), who argue that the technologies developed in the North are not appropriate for the needs of the South, due to a ``technology-skill mismatch'' problem. Chapter 2 tries to solve this problem by putting forward a sector-differentiated IPR protection for developing countries. Specifically, in autarky, the IPR protection in the low-skill intensive sector of the South should be greater than its high-skill intensive sector. However, the greater protection for the low-skill intensive sector is not necessary when free trade in the final good is allowed between the North and South. This implies that international trade can help the South solve the technology-skill mismatch problem. In Chapter 3, I estimate product quality at the sector level for twenty OECD countries based on a gravity equation derived from a quality-heterogeneity model of trade. I find that the estimated quality levels vary substantially across countries and over time, and as in Hallak and Schott (2011), there is a positive correlation between countries' product quality and their per-capita income that is declining over time. Lastly, the quality gap between rich and poor countries is more pronounced in capital- and skill-intensive sectors. Using quality estimates from Chapter 3, the fourth chapter investigates the contributions of import competition and R&D investment to the growth of sectoral product quality. I find that import competition leads to substantial quality upgrading, confirming the findings of Amiti and Khandelwal (2013). I also find that both R&D and human capital can facilitate quality upgrading by increasing the absorptive capacity of developing countries, corroborating the results of Fisher-Vanden and Terry (2009).