International Trade, Technology Diffusion, and the Role of Diffusion Barriers

This paper assesses the welfare impact of trade and technology diffusion, and investigates the change in the cross-country distribution of GDP from removing trade costs and diffusion barriers. The model extends the multi-country Ricardian trade model of Alvarez and Lucas (2007) to include technology diffusion, where the merchandise trade and technology diffusion are jointly determined in equilibrium. A key feature of the model is that some countries export goods produced by foreign technology via technology diffusion. The model is calibrated to match the world GDP distribution, the merchandise trade and technology diffusion (as percentage of GDP), and real GDP per capita for a sample of 31 countries. There are three key findings. First, the welfare gains from removing technology diffusion barriers are 4--60% across countries, generally larger than the gains from removing merchandise trade costs (8--40%). The main reason is that technology diffusion has a larger impact on the nontradable sector due to the substitutability between diffusion and trade in the tradable sector. Another reason is that diffusion barriers are larger than trade costs for most countries. Second, removing barriers to trade and diffusion has little impact on reducing the dispersion of real GDP per capita across countries. Compared to the benchmark, free technology diffusion decreases the Gini index by 4% and free trade decreases the Gini by 2%. Third, removing diffusion barriers increases merchandise trade, but removing trade costs has no clear effect on technology diffusion.

Borders and Distance in Knowledge Spillovers: Dying over Time or Dying with Age? - Evidence from Patent Citations

CESifo Working Paper Series No. 2625

This paper uses a gravity framework to investigate the effects of distance as well as subnational and national borders in knowledge spillovers. Drawing on the NBER Patent Citations Database, I construct a data set to examine patent citations data at the metropolitan level within the U.S. as well as the 38 largest patent-cited countries outside the U.S. Three key findings are documented. First, we find strong subnational localization effects at the Metropolitan Statistical Area and state levels: more than 90% of intranational border effects stem from the metropolitan level rather than state. This is consistent with the artifact of geographic aggregation at the state level for trade flows as in Hillberry and Hummels (2008). Second, border and distance effects decrease with the age of cited patent, which implies that new knowledge faces the largest barriers to diffusion. However, over time, the measured effects of border and distance increased due to two potential reasons: the increased proportion of new knowledge flows and the increased proportion of self-citations over time. Finally, we find that (assignee) self-citations and aggregation bias are two sources of overestimated aggregate border effects of knowledge spillovers. While self-citations are only 11% of total citations, they account for approximately 50% of MSA and national border effects. Decomposing the data along geographic, age or industrial dimensions contributes to the reduction of border effects.

The Higher Educational Transformation of China and Its Global Implications

NBER Working Paper #13849

This paper documents the major transformation of higher education that has been underway in China since 1999 and evaluates its potential global impacts. Reflecting China's commitment to continued high growth through quality upgrading and the production of ideas and intellectual property as set out in both the 10th (2001-2005) and 11th (2006-2010) five-year plans, this transformation focuses on major new resource commitments to tertiary education and also embodies significant changes in organizational form. This focus on tertiary education differentiates the Chinese case from other countries who earlier at similar stages of development instead stressed primary and secondary education. The number of undergraduate and graduate students in China has been grown at approximately 30% per year since 1999, and the number of graduates at all levels of higher education in China has approximately quadrupled in the last 6 years. The size of entering classes of new students and total student enrollments have risen even faster, and have approximately quintupled. Prior to 1999 increases in these areas were much smaller. Much of the increased spending is focused on elite universities, and new academic contracts differ sharply from earlier ones with no tenure and annual publication quotas often used. All of these changes have already had large impacts on China's higher educational system and are beginning to be felt by the wider global educational structure. We suggest that even more major impacts will follow in the years to come and there are implications for global trade both directly in ideas, and in idea derived products. These changes, for now, seem relatively poorly documented in literature.