Geographic Localization of International Technology Diffusion

Convergence in per capita income across countries turns on whether technological knowledge spillovers are global or local in a large class of models. This Paper estimates the amount of spillovers from R&D expenditures in major industrialized countries on a geographic basis. A new data set is used which encompasses most of the world's innovative activity at the industry-level between the years 1970 and 1995. First, I find that technological knowledge is to a substantial degree local, not global, as the benefits from foreign spillovers are declining with distance. I estimate that the distance at which the amount of technological knowledge is halved is about 1,200 kilometres. Second, while technological knowledge has become considerably more global over time, strong spatial patterns do persist. I also find that language skills are important for diffusion, which suggests that a substantial portion of international technology diffusion is unrelated to trade in high-technology goods.