Stolpe, Michael

English

Research Papers in Economics

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Stolpe, Michael
Book Review
[Book Review of] Ochoa, Orlando A. : Growth, trade
and endogenous technology : a study of OECD
manufacturing : Houndsmill, MacMillan, 1996
Weltwirtschaftliches Archiv
Provided in cooperation with:
Institut für Weltwirtschaft (IfW)
Suggested citation: Stolpe, Michael (1998) : [Book Review of] Ochoa, Orlando A. : Growth,
trade and endogenous technology : a study of OECD manufacturing : Houndsmill, MacMillan,
1996, Weltwirtschaftliches Archiv, ISSN 0043-2636, Vol. 134, Iss. 1, pp. 155-156, http://
hdl.handle.net/10419/2221Rezensionen - Book Reviews 155
CGE models should not be considered as prognoses, but rather as quantifiable con-
jectures.
Unfortunately, the conference volume has no articles identifying and advocating
future needs for reform ofthe present WTO system. While some opinions as to future
reform agendas are hidden in some ofthe articles, no author has strung these together
and given an overall assessmentofwhatis left to be done. An exception is the final arti-
cle by Kym Anderson who addresses the intrusion of environmental and labour stan-
dards into trade policy- a subject, itmust be hoped, that will not manage to find its way
onto future reform agendas. Here, the reader is compensated for the lack ofnormative
thinking about the future by an excellent case against environmental and labour stan-
dards as part ofa new GATI.
On the whole, the volume is a very good and detailed overview of the UR results
and the potential impacts on world trade. Its descriptive as weIl as its analytical content
go beyond assessing changes in developing countries trade positions after finalization
ofthe UR and implementation ofthe new WTO system. Such broader focus on world
trade is necessary. The interdependency ofthe trade system means that the adjustment
processes in developing countries not only depend on the implementation of the
UR agreements and further trade liberalization in some ofthese countries, but will also
be influenced by adjustment processes taking place in developed countries. It is apt to
point out that more attention should have been given to discussing the cases for and
against special and differential treatment ofdeveloping countries. The preservation of
this principle which forms part ofthe UR (compromise) package continues the GATT
traditionofdifferentspeeds oftradeliberalizationand thetraditionofdevelopmentstrat-
egies that have tumed out to be ineffective.
The interested reader should be aware that my review has ordered the papers into
subgroups which will notbe found in the bookitself. In my view, this would have great-
ly enhanced the book; instead the reader is presented by a rather unstructured number-
ing offifteen papers - possibly an outcome offollowing the conference timetable. The
result is that the articles tend to overlap, especially where results of the UR are con-
cerned. Yet, readers who get through these reiterations will be compensated by detailed
insights into the world trade prospects under the new WTO and into methodological
approaches for building applicable world trade models.
Dieter Bender
Ochoa, Orlando A., Growth, Trade and Endogenous Technology: A Study ofOECD
Manufacturing. Houndsmill, Basingstoke, London, New York 1996. MacMillan
Press. XIII, 198 pp.
This remarkable monograph presents a carefully crafted and comprehensive empir-
ical exploration ofPaul Romer's famous model of endogenous technological change.
The study is based on a disaggregated data set for manufacturing industries in eleven
OECD countries during the period from 1970 to 1987. Its finding that output growth is
determined by sectoral research effort, the potential for technological catch-up and a
country's technology policy, as weIl as growth in capital and employment, supports
Romer's central hypotheses about the growth effects ofknowledge production and dif-
fusion: increases in the relevant stockofhuman capital are the ultimate source oflong-
run growth; productivity grows as a consequence ofendogenous technological change,
which in turn is driven by new capital inputs and knowledge externalities; and govern-
ment policy can have a positive impact on that process.
Ochoa'sbookbegins with areviewofthemain strandsofnewgrowththeory, empha-
sizing the genesis and intellectual contribution of the Romer model. Building on this156 Weltwirtschaftliches Archiv 1998, Vol. 134(1)
review, five subsequent chapters report Ochoa's empirical work. The first of these
derives the empirical predictions and an econometric specification of Romer's model
used throughout the book; it also discusses methodological issues in cross-country
growth analysis and data characteristics.
The second empirical chapterexamines the contribution ofcapital to output growth
across manufacturing sectors as implied by the basic neoclassical model. But Ochoa
finds that higher growth performance is not just linked to higher investment, but also
to new capital inputs, identifiablesourcesofendogenous technological change andtech-
nological catch-up.
The third empirical chapter examines trade and other cross-country, cross-industry
differences as sources ofendogenous technology. As impliedby Romer's model, Ochoa
rejects thenotion ofexogenoustechnologyandgeneralizeddiminishingreturns. Instead,
he finds that growth at the industry level is largely explainedby the interaction between
growth in physical capital andthe human capital employed in the business research sec-
tor as weIl as by international productivity convergence.
Thefourth empiricalchapterexamineshumancapitalandresearchactivities as sourc-
es ofcomparative advantage, taking a long-run approach. Ochoa finds further support
for Romer's basic model ofendogenous technological change, but cannot confirm the
postulated direction ofcausality from trade to growth. He emphasizes the difficulty of
separating any measure oftrade performance from measures ofendogenous technolo-
gy, which he suspects as afundamental sourceoflong-termcomparative advantage. The
accumulation oftechnical human capital is identified as one ofthe nation-specific fac-
tors behind country-wide productivity gains.
The fifth empirical chapter attempts an assessment of the impact of national tech-
nologypolicies, infrastructureinvestments andmacroeconomic policyon outputgrowth
in manufacturing. Only for technology policy, proxied by the number ofresearch sci-
entists and engineers employed in government and higher education, does Ochoa find
a positive impact on growth in OECD manufacturing industries.
Althoughitis apity thatthis extensivestudyhadbeencompletedbeforeJones (1995)
astutely criticized Romer's model for its counterfactual scale effects, Ochoa has writ-
ten a useful book. He avoids the methodological pitfalls that bedevil the convergence
literature and argues persuasively that the detailed study ofmanufacturing industries is
more informative about the sources of growth than cross-country regressions at the
aggregate level. However, the path-dependent nature ofhis research voyage, which has
involved repeated respecification and sequential testing ofbasically one and the same
regression equation, may be judged as a drawback. Although his approach is firmly
based on theory, the most exacting criticisms would rightly be concerned about data
mining. In spite ofthis, Ochoa's study is to be commended for offering a unique blend
oftheory, data and estimation, as weIl as thoughtful, non-technical interpretations. This
book should be ofinterest to growth economists and policymakers alike.
References
Jones, C. J. (1995). R&D-BasedModels ofEconomicGrowth. Journal0/PoliticalEco-
nomy 103(4):759-784.
Romer, P. M. (1990). Endogenous Technological Change. Journal0/Political Economy
98(5)suppl.:S71-S102.
Michael Stolpe

R&D-BasedModels ofEconomicGrowth.

[Book Review of] Ochoa, Orlando A. : Growth, trade and endogenous technology : a study of OECD manufacturing : Houndsmill, MacMillan, 1996.

http://www.econstor.eu/bitstream/10419/2221/3/262291177.pdf

[Book Review of] Ochoa, Orlando A. : Growth, trade and endogenous technology : a study of OECD manufacturing : Houndsmill, MacMillan, 1996.

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