Trade Liberalization and Technology Diffusion

Abstract

The paper considers the role of technology diffusion and trade liberalization for the catching-up of structurally backward countries. A New Economic Geography model is presented that accounts for firm entry/exit and international mobility of skilled labor employed in public R&D sectors. This raises the traditional agglomeration effects in a core-periphery setting as firms and mobile factors usually cluster within spatial agglomerations. With international technology diffusion, however, there is a counteracting effect on the traditional agglomeration effects as firms in the periphery also benefit from increasing R&D expenditures in the core lowering entry costs for firms. It is found that the catching-up of structurally backward countries is spurred not only as a result of trade integration but also because of technology diffusion.

Tax Competition and Economic Integration

“…Based on Krugman and Venables's () framework and its adoption by Puga (), I use an agglomeration model with Marshallian externalities from Hafner (), which accounts for firm entry/exit and international mobility of skilled labor employed in the public R&D sectors. The model also coincides with Feldman and Florida () and other studies in emphasizing the link between skilled labor, R&D activity, and the clustering of firms.…”

“…Ottaviano and Thisse () trace the higher mobility of skilled labor to their specific human capital stocks, which can easily be transferred to other regions. Skilled labor in Hafner () is employed in public R&D sectors where innovation‐generating knowledge spills over to private enterprises as in Mansfield (, ) and Audretsch and Feldman (). Furthermore, Hafner () assume that public R&D reduces firms' fixed costs.…”

“…Skilled labor in Hafner () is employed in public R&D sectors where innovation‐generating knowledge spills over to private enterprises as in Mansfield (, ) and Audretsch and Feldman (). Furthermore, Hafner () assume that public R&D reduces firms' fixed costs. Therefore, as more skilled labor is employed in domestic R&D, the fixed costs of a firm's operations decrease, which in turn leads to higher share of local producers by market entry.…”

“…In contrast to other NEG contributions on tax competition, I focus on its impact on labor migration and net earnings of skilled and unskilled labor within economically integrating regions. I therefore use a NEG model from Hafner (), which accounts for firm entry/exit and international mobility of skilled labor employed in the public R&D sectors, and adopt it to tax competition. The model accounts for both Hirschman's () “cost” and “demand linkages” and Krugman's () “home‐market effect”, since both firms and mobile factors usually cluster in spatial agglomerations.…”

Technology spillover effects and economic integration: evidence from integrating EU countries

“…Finally, Eaton and Kortum (1999) point to the pattern of international patenting, as patents directly reflect the link between the source and the destination of transferred technology. Since relationships between countries are becoming closer within economically integrating regions, Hafner (2011) shows that spatial integration and technology diffusion lead to self-reinforcing processes, spurring and fostering economic development.…”