Exploring technology upgrading of emerging economies: From ‘shifting wealth I’ to ‘shifting wealth II’?

Abstract

The initial opening of China and India coupled with the opening of the former socialist countries in the 1990s led to the integration of 40% of the global labour force into the world economy, causing large-scale effects regarding market integration, catching up, and income distribution. This trend has been defined as ‘Shifting wealth I’ (OECD, 2010, OECD, 2015). However, today, there is some uncertainty as to whether this process will continue, i.e. whether emerging economies will continue their process of technological upgrading and move from efficiency to innovation-driven growth. Whether we will observe ‘Shifting Wealth II’ or the further growth of emerging economies will ultimately depend on whether the productivity growth of emerging economies will be associated with further upgrades in technology.1 In addition, technology upgrading was, until recently at least, to some extent positively connected with the prevailing liberalized trade regime. Currently there are political developments around the world which represent a threat to the established trade system by way of increasing national protectionism which might impact future upgrading in one way or the other.