Trade-Induced Technology Spillover and Adoption: A Quantitative General Equilibrium Application

Abstract

This paper investigates the impact of a 4% Hicks-neutral technical progress in heavy manufacturing in the United States and its trans-border spillover via intermediates. A three-region, six-traded-commodity computable general equilibrium model is numerically simulated to show that differentials in regional productivity improvements depend on their absorptive capacity and structural similarity. This determines the extent of technology capture. The model results show that the productivity improvement and transmission result in productivity growth in sectors intensively using heavy manufacturing. Returns to skilled labour depend on technology spillover and capture parameter. The results have implications for the role of human capital in assimilating advanced technology.

Keywords: Absorptive Capacity, Structural Similarity, Capture Parameter, Trade, and Technology

JEL Classification: D58, F16, O4