How does trade-mediated technology transfer affect interregional and intersectoral competition? Exploring multi-sectoral effects in a global trade model

Abstract

In this paper, all technology transfers are embodied in trade flows within a three-region, six-tradedcommodity version of the GTAP model. 4% Hicks-Neutral technical progress in heavy manufacturing in one region has uneven impacts on productivity elsewhere. Why? Destination regions’ ability to harness new technology depends on their absorptive capacity and on the structural congruence of the source and destination. Together with trade volume, these two factors determine the recipient’s success in capturing foreign technology. Sectors, intensive in heavy manufacturing, register higher productivity growth. Inter-regional competition coupled with changes in price relativities, loom large in general equilibrium adjustment. Hicks-neutrality of the TFP (total factor productivity) improvement implies that, at the initial configuration of inputs, the marginal products of land, labour, and capital, change by the same proportion in any region. However, for the experiment conducted, productivity changes and the spillover coefficients dominate the variable impact across sectors and regions.