Trade-Related Technology Diffusion and the Dynamics of North-South and South-South Integration

This paper examines the impact on total factor productivity of North-South and South-South trade-related research and development (R&D) spillovers. It is the first to do so at the industry level for developing countries. North-South and South-South R&D flows are constructed based on industry-specific R&D in the North, North-South and South-South trade patterns, and input-output relations in the South. The main findings are: 1) North-South and South-South R&D flows have a positive impact on total factor productivity, though the former is larger. 2) R&D-intensive industries benefit mainly from North-South R&D flows while low R&D-intensive industries benefit mainly from South-South R&D flows. These results have implications for dynamic comparative advantage and for the dynamics of North-South and South-South regional integration.