Openness, Technology Capital, and Development

In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. What distinguishes technology capital from other forms of capital is the fact that a firm can use it simultaneously in multiple domestic and foreign locations. Foreign technology capital is exploited by permitting foreign direct investment by multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.

Openness, technology capital, and development

A framework is developed with what we call technology capital. A country is a measure of locations. Absent policy constraints, a firm owning a unit of technology capital can produce the composite output good using the unit of technology capital at as many locations as it chooses. But it can operate only one operation at a given location, so the number of locations is what constrains the number of units it operates using this unit of technology capital. If it has two units of technology capital, it can operate twice as many operations at every location. In this paper, aggregation is carried out and the aggregate production functions for the countries are derived. Our framework interacts well with the national accounts in the same way as does the neoclassical growth model. It also interacts well with the international accounts. There are constant returns to scale, and therefore no monopoly rents. Yet there are gains to being economically integrated. In the framework, a country's openness is measured by the effect of its policies on the productivity of foreign operations. Our analysis indicates that there are large gains to this openness.Technology - Economic aspects

Openness, technology capital, and development

In this paper, we extend the growth model to include firm-specific technology capital and use it to assess the gains from opening to foreign direct investment. A firm's technology capital is its unique know-how from investing in research and development, brands, and organization capital. What distinguishes technology capital from other forms of capital is the fact that a firm can use it simultaneously in multiple domestic and foreign locations. Foreign technology capital is exploited by permitting foreign direct investment by multinationals. In both steady-state and transitional analyses, the extended growth model predicts large gains to being open.Technology - Economic aspects

Human Capital, Trade, FDI and Economic Growth in Thailand: What causes What?

We investigate the causal links between human capital, openness through trade and FDI, and economic growth using quarterly data for Thailand over the period 1973:2-2000:4. A number of hypotheses are investigated including, in particular, FDI-led growth and export-led growth, as well as the reverse linkages from growth to FDI and exports. The importance of human capital is highlighted as complementary to trade and FDI inflows, underlying the importance of technology adoption. We find that, after controlling for domestic investment, government expenditure and imports, support for FDI-led growth is not as strong as export-led growth, although allowing for the joint interaction of FDI and human capital reveals a positive FDI effect above a minimum threshold of human capital, estimated to be around 4.5 years of average secondary schooling attainment. Extending our study using multivariate causality tests conducted within a vector error correction framework, we also find significant effects of domestic investment and trade openness, providing support for import-led growth, but direct support for FDI-led growth as well as growth-led FDI is again relatively weak, reinforcing the conclusion that trade openness has played a more significant role than FDI in influencing Thai economic growth. But the results reveal a subtle role for technology transfer through the complementary effect of trade on FDI, and FDI on government expenditure, which thereby influences human capital development with spillovers onto domestic investment and growth. This leads us to argue that there is a potential role for FDI interacting with human capital in influencing the future development of the Thai economy, given its recently active policy of FDI promotion.Trade Openness, FDI, Growth, VECM, Technology Adoption

Digital Divide: An Econometric Study of the Determinants in Information-poor Countries

There can not be two opinions on the importance of Information and Communication Technology (ICT) for economic development. However, real disparities exist in access to and use of ICT across countries. The digital divide is a complicated matter of varying levels of access, basic usage, and applications of ICT among countries and peoples. Using the Gompertz Technology Diffusion model, this paper attempts to measure the contribution of factors such as affordability, knowledge, infrastructure, human capital, trade openness, and economic and social environment in the technology diffusion process, specially in the case of information-poor countries.Digital Divide, Information and Communication Technologies, ICT, Gompertz Model, ICT Diffusion, Economic Development, ICT Infrastructure

Technology capital transfer

It is widely believed that an important factor underlying the rapid growth in China is increased foreign direct investment (FDI) and the transfer of foreign technology capital, which is accumulated know-how from investment in research and development (R&D), brands, and organizations that is not specific to a plant. In this paper, we study two channels through which FDI can contribute to upgrading of the stock of technology capital: knowledge spillovers and appropriation. Knowledge spillovers lead to new ideas that do not directly compete or devalue the foreign affiliate’s stock. Appropriation, on the other hand, implies a redistribution of property rights over patents and trademarks; the gain to domestic companies comes at a loss to the multinational company (MNC). In this paper we build these sources of technology capital transfer into the framework developed by McGrattan and Prescott (2009, 2010) and introduce an endogenously-chosen intensity margin for operating technology capital in order to capture the trade-offs MNCs face when expanding their markets internationally. We show that economic outcomes differ dramatically depending on the source of greater openness and the channel with which technology capital transfer is operative.

Working Paper 144 - An Analysis of the Impact of Financial Integration on Economic Activity and Macroeconomic Volatility in Africa within the Financial Globalization Context

The purpose of this study is to provide an empirical analysis of some of the impacts of international financial integration on economic activity and macro-economic volatility in African countries. It is acknowledged that financial integration affect several aspects of economic performance, particularly increases investment rates, technology transfers, trade openness, stimulates the development of domestic financial system and economic growth. Similarly, financial integration is recognized as a potential source of macroeconomic instability. The results of empirical analysis show that the impact of external capital flows on growth seems to depend mainly on the initial conditions and policies implemented to stabilize foreign investment, increase domestic investment, productivity and trade, develop the domestic financial system, expand trade openness and other actions aimed at stimulating growth and reducing poverty. The analysis also shows that financial instability was particularly severe as from the nineties. The instability was more pronounced in the case of portfolio investments than in foreign direct investments because of the longer-term relationship established by the latter. Similarly, trends in official capital flows were less unstable than in private capital flows. Lastly, the volatility of capital flows observed in financially “open” and “closed” countries was accompanied by moderate macroeconomic instability.

Foreign Investments in Development, does it really matter? An analysis under Pakistan’s Perspective

Foreign investments’ (F.D.I) remains a ‘substantial element’ in the economic development of developing nations, such as Pakistan. In recent times, the F.D.I received a greater consideration as a growth accelerating catalyst in the developing economies. As the F.D.I assists a country in terms of better technology, transfer of skills and the much-required money for development. Studies validate the relationship between the F.D.I and ‘Gross domestic Product’ (G.D.P) with empirical findings. Study uses longitudinal data for the past 21 years, from 1996 till 2016 in order to investigate the effect of F.D.I on the economic development of Pakistan. Apart from F.D.I, other variables such as Political stability, terrorism and Trade openness too included in this study. A ‘least square technique’ is smeared to empirically test impact of ‘independent variables’ on G.D.P. Results demonstrates F.D.I puts a positive impact in the ‘economic growth’, and it is apparent with the help of statistics that there is a greater F.D.I impact whenever there are open trade policies in the country. Keywords: G.D.P, F.D.I, Trade Openness, Terrorism, Political Instability, Capital accumulation, Capital investments, Capital stocks, International economics, Time series, Time series analysis, Growth capital, Emerging technology DOI: 10.7176/PPAR/9-2-0

Income inequality, TFP, and human capital

WOS:000399319600005 (Nº de Acesso Web of Science)A fruitful recent theoretical literature has related human capital and technological development to income (and wage) inequality. However, empirical assessments on the relationship are relatively scarce. We relate human capital, total factor productivity (TFP) and openness to inequality and discover that, when countries are assumed to be heterogeneous and dependent cross-sections, human capital is the most robust determinant of inequality, contributing to increasing inequality, as predicted by theory. TFP and openness turned out to be non-significantly related to inequality. These results are robust to a number of robustness tests on specifications and data and open up the prospect of theoretical research on the country-specific features conditioning the effect of human capital, technology and trade on inequality.info:eu-repo/semantics/acceptedVersio

Technology Transfer Through Trade

This paper examines the role that trade plays in economic development through the channel of technology transfer, approximated by total factor productivity. Three strains of factors influence the process of technology transfer; direct effort that is taken to transfer technologies, the capacity to adopt technologies, and differences in the underlying conditions between donor- and receiving countries. In this context, trade in (capital) goods allows technology import and improved input decisions. Second, trade opens export markets, allowing learning-by-doing. Third and most importantly, trade increases the set of accessible technologies, increasing the scope for imitation. The theoretical insights are compared to the empirical literature that deals with trade and technology transfer. Not surprisingly, it turns out that openness and human capital have a positive influence on the transfer of technology. Yet methodological problems with the data weaken the practical significance of the results, especially as the precise and fundamental mechanism of spillovers and the factors that condition the degree of technology transfer are not profoundly illuminated. These underlying processes have to be better understood in order to be able to give valuable policy recommendations that will go beyond the general advice of increasing openness and human capital formation.Technology transfer, Trade, Economic growth, Total factor productivity