Which Indicators of Absorptive Capacity Enhance Import-Induced South-North Convergence in Labor Intensities?

33 Pages Posted: 29 Nov 2013

See all articles by Michael Hübler

Michael Hübler

Leibniz Universität Hannover

Alexander Glas

University of Nuremberg-Erlangen

Date Written: November 20, 2013


We hypothesize that North-South trade is associated with knowledge spillovers that create labor productivity gains depending on various determinants of Southern absorptive capacity. We use the novel World Input-Output Database (WIOD) that provides bilateral and bisectoral panel data for 39 countries and 35 sectors for 1995-2009. We examine growth in relative South-North labor intensities (South-North convergence) for 31 industrialized source and eight emerging recipient countries. We find robust evidence that the following measures of absorptive capacity (ordered by magnitude of the estimated coefficients) interact with imports so that relative labor intensity is reduced: economic freedom and political and civil rights, services, skills, scientific publications and patents as well as telephone and internet access. GMM and GLS estimations corroborate the results. Policies that support various of the identified determinants of absorptive capacity are more promising than policies that select only one. Elevating the absorptive capacity of emerging economies to the maximum level in the world would halve the South-North gap in labor intensities within a couple of decades if it were solely achieved through the trade channel.

Keywords: absorptive capacity, labor intensity, trade, South-North, convergence

JEL Classification: C23, F18, F21, O13, O33, O47, Q43

Suggested Citation

Hübler, Michael and Glas, Alexander, Which Indicators of Absorptive Capacity Enhance Import-Induced South-North Convergence in Labor Intensities? (November 20, 2013). ZEW - Centre for European Economic Research Discussion Paper No. 13-102, Available at SSRN: https://ssrn.com/abstract=2360521 or http://dx.doi.org/10.2139/ssrn.2360521

Michael Hübler (Contact Author)

Leibniz Universität Hannover ( email )

Institute f. Environm. Economics and World Trade
Koenigsworther Platz 1
30167 Hannover, DE 30167

Alexander Glas

University of Nuremberg-Erlangen ( email )

Lange Gasse 20
Nuremberg, 90403
+49 911 5302-278 (Phone)

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