Do trade patterns and technology flows affect productivity growth?

This article presents a model suggesting that the pattern of a country's intermediate goods imports affects its level of productivity because a country that imports such goods primarily from technological leaders receives more technology than a country that imports primarily from follower countries. The importance of trade patterns in determining technology flows is quantified using industry-level data for machinery goods imports and productivity from eight member countries of the Organisation for Economic Go-operation and Development between 1970 and 1991. Three conclusions emerge from this work. First, the eight countries studied appear to benefit move from domestic research and development (R&D) than from R&D of the average foreign country. Second, conditional on technology diffusion from domestic R&D, a country's import composition matters only if it is strongly, biased toward or away from technological leaders. Third, differences in technology inflows related to the pattern of imports explain about 20 percent of the total variation in productivity growth. The implications of these findings for developing countries are discussed.