Understanding North South technological flows From macro to microGiorgio Barba NavarettiUniversity of Milan and Centro Studi Luca dAgliano

World Bank, Knowledge Economy Forum VIIAncona June 17, 2008

Structure of presentationFirst and second unbundling:From polarization (from 1750 to 1950) to technology transferChannels of North South transfer:Trade Fdi Increasing emphasis on the role of the firm => Beyond representative agent Third unbundlingFragmentation of productionGeography of technology flows changes

First unbundling: markets from production

Grafico10

410887

916866

1425866

21641043

38871242

691001731

1261152632

source: Baldwin and Martin NBER 6904 from Bairoch (1982)

USA

UK

Italy

China

India-Pak

Per Capita Industrialization Levels, 1750-1913 (UK 1900=100)

Foglio1

Per Capita Industrialization Levels, 1750-1913 (UK in 1900=100)Composition of North-South Trade, 1955 to 1989

1750180018301860188019001913North's Exports to South:

USA49142138691261955197019801989

UK1016256487100115Manufactures (% of total)73787979

Italy88810121726South's Exports to North:

China8664433Fuels (% of total)20336625

India-Pak7663212Other Primary (% of total)74511821

Manufactures (% of total)5161553

Source: Wood (1994), which is based on UNCTAD data and definitions.

OLS with Lagged and Contemporaneous Spillover Variables

Domestic Firms

Backward0.0086*

(0.0051)

Forward0.0001

(0.0027)

Horizontal0.0040***

(0.0014)

Intercept5.2082***

(0.0876)

No. of observations10,216

0.92

Source: Smarzynska Javorcik (2004)

Foglio1

source: Baldwin and Martin NBER 6904 from Bairoch (1982)

USA

UK

Italy

China

India-Pak

Per Capita Industrialization Levels, 1750-1913 (UK 1900=100)

Foglio2

Foglio3

Second unbundling:ideas from production and markets

Foglio1

Per Capita Industrialization Levels, 1750-1913 (UK in 1900=100)Composition of North-South Trade, 1955 to 1989

1750180018301860188019001913North's Exports to South:

USA49142138691261955197019801989

UK1016256487100115Manufactures (% of total)73787979

Italy88810121726South's Exports to North:

China8664433Fuels (% of total)20336625

India-Pak7663212Other Primary (% of total)74511821

Manufactures (% of total)5161553

Source: Baldwin and Martin, from Wood (1994).

Foglio1

00000

00000

00000

00000

00000

00000

00000

source: Baldwin and Martin NBER 6904 from Bairoch (1982)

USA

UK

Italy

China

India-Pak

Per Capita Industrilization Levels, 1750-1913 (UK 1900=100)

Foglio2

Foglio3

Channels for technology transferTradeCoe-Helpman (1995) onwardsKnowledge content of trade

FDI: analysis of spilloversBlomstrom et al in the 80s on developing countriesBUT MOSTLY IN THE AGGREGATE

How to measure quality of trade:e.g. Knowledge content of machinesFrom Barba Navaretti, Schiff and Soloaga, 2006

Chart2

101.3537108679105.180221325673.963872906379.509195405796.8995489797

99.0700231981101.175746228171.654745272577.909269070396.9188672749

92.562576310896.579592727766.346734950978.752929211892.9429250597

89.251223623994.291541309365.335329095975.953524446192.8264975003

79.189885017591.587516079965.107641677872.33895247589.3644576577

75.688843742193.231246127167.052258031272.780428924191.6918283546

69.970085178293.496696394765.593335834870.973377530288.3736622329

Egypt

Israel

Morocco

Tunisia

Turkey

Three years moving averages

Aggregate Unit Value Index (US=100)

Figure 2aTrends in the Aggregate Unit Value IndexSouthern Mediterranean

Sheet1

1989199019911992199319941995199619971989-911990-921991-931992-941993-51994-61995-97

311Bulgaria167120147881071137771861451191141039987781989-911990-921991-931992-941993-51994-61995-97

313Bulgaria147214314216122108145141153225248218149125131146

321Bulgaria1421081201511251168978851241261321311109484Egypt101999389797670

322Bulgaria1171136262508036363297795864555034Hungary1231059187848177

341Bulgaria167184106110126101117140166152133114112115119141Israel1051019794929393

342Bulgaria1481259210361958698941221078586819393Jordan82777474748086

362Bulgaria94701636079556465341099810164666155Morocco74726665656766

371Bulgaria26828313811513012387113180230179128123113108127Poland116948480797776

323324Bulgaria14012214015777671038992134140125100828695Tunisia80787976727371

331332Bulgaria101138936979586343401111008069675549Turkey97979393899288

355356Bulgaria108151701029927110175611101089015715714979

381382384Bulgaria19417718016013717914235967184172159158153226189

311Egypt92968881836959626992888478706363

313Egypt79100971006497875712992998787838091

321Egypt88786968655964645478716764636261Bulgaria14513411711010210597

322Egypt105959384604850753298917964535852Malta118110120116124129138

341Egypt13010712811910481477266122118117101776762Romania12311411111211010296

342Egypt13110274659169526854102807675716358

362Egypt73546873716356584065657169635951

371Egypt19928716324518825514710283216232198229196168111

323324Egypt150617681636794995995727370758784

331332Egypt646467140656459734765909089636560

355356Egypt74759076555572666880817462616569

381382384Egypt1181141038790687077871121029382767278

311Hungary143.9103.2107.3108.179.691.876.782.577.11181069893838479

313Hungary1851241101057763100104831401139781808996

321Hungary118110859682951027660105978891939179

322Hungary95935265504441363580705653454137

341Hungary10911410813911392868393110120120114978787

342Hungary150977679891381328769108848110212011996

362Hungary132109105658479686942115938576777259

371Hungary18642114497938589727325022111192898278

323324Hungary14467907512560899387100779787918189

331332Hungary23110483997064655153140968478666056

355356Hungary121897787748189656396847981817872

381382384Hungary133951041128492831107611110410096869590

311Israel128103106103888882101891121049993869091

313Israel12311181124867768941151051059796778093

321Israel100100116108991049686841061081081041009589

322Israel17414312414811811897115104147138130128111110105

341Israel1051241531038310311374107128127113961009798

342Israel10798104959396908685103999795939187

362Israel85675461714858625469616260595658

371Israel117998311110210699946510098991061029986

323324Israel12971937277741021281109879817485101113

331332Israel779176988683126828181888789989796

355356Israel1151038911589959492113102103981009394100

381382384Israel1131289493819910711994112105899196108107

311Jordan12610399655959687676109897461626874

313Jordan112684914771119678370778889112859073

321Jordan8910685608787831158993847778869595

322Jordan1229223545067821194279564257668981

341Jordan981207894739396848798978287879189

342Jordan13957117888499998279104879690949387

362Jordan32267145574849263343485850514136

371Jordan368581868051170965867848272100105108

323324Jordan77119811271036636122779210910499697578

331332Jordan59649749436852377173706353545253

355356Jordan120356151578866545272495766716957

381382384Jordan111705765616468147397796461636493204

311Malta127115109686775767380117988270737576

313Malta7684878612979699230828610198928064

321Malta1048510990829483959399959389869190

322Malta111719378194106921141089180122126131104105

341Malta474860882151438869104526512114914910087

342Malta200115211135218172273144299175153188175221196239

362Malta58657570464441937466706453435969

371Malta127107899917567859066108991211141098080

323324Malta304119274135124193200299273232176178151172231257

331332Malta826497865770110846081838071798885

355356Malta177137183206114193230323174166175168171179249243

381382384Malta139194123120118140187258344152145120126148195263

311Morocco91687255555547614777656055525452

313Morocco91120116167882129976146109134123155133129107

321Morocco70767470787667675974737475747064

322Morocco56524652504046524051504947454646

341Morocco7110210160665162626291887659605962

342Morocco79666849505656616271615652545860

362Morocco69557940508676644268585659717560

371Morocco968810284626366909195918270647382

323324Morocco55737844596967738969656157656976

331332Morocco67595053433654362959544844444240

355356Morocco56665361605673767258605859636874

381382384Morocco70745454485567616566605252576164

313Poland1911481099682936878711491189690817972

321Poland1411221039686857771631221079589827770

322Poland83624962464945574965585353475150

341Poland1329587707480806780105847775787676

342Poland123767560537353696091706262606561

362Poland161146977776576079601351078370646566

371Poland1901401071071539713310276146118123119128111104

323324Poland16110749616544677282106735857596174

331332Poland11291728480921097210791827985949196

355356Poland83908373707081667685827571747374

381382384Poland150156125107969487937514412910999929185

311Romania288861001007596798078158959290848579

313Romania245317312910710065897911677103112918477

321Romania19523412814315611812715890186168142139134134125

322Romania12811569865678546446104907073636555

341Romania103916623492274158965687130131200175176104

342Romania70837560474539514576736151444545

362Romania746787618892906110076727980908184

371Romania24123112214232577391164119198165196182265211225

323324Romania267126122115786569868817212110586717481

331332Romania911011031061068977755698103105100908070

355356Romania118213901221029410379101141142104106999294

381382384Romania13512814715817911811589157137144161151137107120

311Tunisia91919173616967728491857568666974

313Tunisia97695371558561768573646070677474

321Tunisia76887974747571676081807675747166

322Tunisia50474646484447483448464746464643

341Tunisia605373133747891706562869395818075

342Tunisia8563105711138782717084799690948075

362Tunisia55626656335076413561615246535551

371Tunisia929510985747394956399968977808784

323324Tunisia84889474706869818889857971697380

331332Tunisia8861651071066371935671779292807673

355356Tunisia119637974746361727687727670666570

381382384Tunisia1258973807373611078896807575698085

311Turkey110861181139999708771104106110104898576

313Turkey17612513316012592117133116145139139126111114122

321Turkey79747784777589847376787979818382

322Turkey104908096766570687591898479706871

341Turkey898512211962886465909910910190717373

342Turkey85756477667662695675726973686962

362Turkey80748876617274885981797570697874

371Turkey1122061198317816513410593146136127142159135111

323324Turkey1359796106829697139126109100959592111121

331332Turkey749494125791251059882871049911010310995

355356Turkey65606267498080818563635965698082

381382384Turkey9087107978010483817495979594898979

87

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Hungary

Israel

Morocco

Poland

Tunisia

Turkey

Three years moving averages

Aggregate Unit Value Index (US=100)

Trends in the Aggregate Unit Value Index

UVGDPFDI

Bulgaria97.443399433911.811804.9382367134

Croatia86.669797951945.84580..

Czech Rep85.013034711652.152102.4714276791

Egypt69.97008517821212001.1784979105

Hungary76.420984725945.145104.5467629433

Israel93.4966963947161.8161802.758838892

Jordan86.312632302315.415400.3136284947

Morocco65.593335834812.612603.5805659294

Poland74.78976245623838003.6178953648

Romania96.501657693614.114103.4870836735

Slovakia88.517930901236.836800.8478360772

Slovenia90.549774674398.698601.7624932528

Syria8810.510500.446944356

Tunisia70.843458034920.820801.6687250137

Turkey87.34053413923232000.4239555597

0.3128486941-0.0111774955

IndexGNPindexgnp/100

Morocco65.59333583484.343329886265.593335834812.6

Egypt69.97008517824.136504653669.970085178212

Tunisia70.84345803497.169941399570.843458034920.8

Poland74.789762456213.09893140374.789762456238

Hungary76.420984725915.54636332376.420984725945.1

Czech Rep85.013034711617.959324370985.013034711652.1

Croatia86.669797951915.787659427886.669797951945.8

Turkey87.340534139211.030679076287.340534139232

Slovakia88.517930901212.685280937688.517930901236.8

Slovenia90.549774674333.988279903590.549774674398.6

Israel93.496696394755.773871078993.4966963947161.8

USA100100100290.1

0.7207659183

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

GNP Per Capita Index (1997, USA = 100)

Unit Values Index (av. 1995-97, USA=100)

Unit Values and GNP per Capita

Persistency of the technology gap, 7 years lagFrom Barba Navaretti, Schiff and Soloaga, 2006

The firmTrade:Beyond the representative agentStudies by James Tybout and othersSelf selection vs. learning by exporting? What characteristics of the firm strengthen the link between export and productivity?FDI Whats the channel: vertical or horizontal linkages?

Be more specific about exports!Productivity growth declines with exports up to an average 38-48% share, then it risesFrom Barba Navaretti, Tucci and Galeotti, 2002

Export Share in 1999 for a sample of Indian firms (Kernel Density)

EMBED Word.Picture.8

_1102769607.doc

0

.5

1

0

.5

1

Backward linkages matter

Foglio1

Per Capita Industrialization Levels, 1750-1913 (UK in 1900=100)Composition of North-South Trade, 1955 to 1989

1750180018301860188019001913North's Exports to South:

USA49142138691261955197019801989

UK1016256487100115Manufactures (% of total)73787979

Italy88810121726South's Exports to North:

China8664433Fuels (% of total)20336625

India-Pak7663212Other Primary (% of total)74511821

Manufactures (% of total)5161553

Source: Wood (1994), which is based on UNCTAD data and definitions.

OLS with Lagged and Contemporaneous Spillover Variables

Dependent variable: firm's output

Domestic Firms

Backward0.0086*

(0.0051)

Forward0.0001

(0.0027)

Horizontal0.0040***

(0.0014)

Intercept5.2082***

(0.0876)

No. of observations10,216

R20.92

Source: Smarzynska Javorcik (2004)

Foglio1

source: Baldwin and Martin NBER 6904 from Bairoch (1982)

USA

UK

Italy

China

India-Pak

Per Capita Industrilization Levels, 1750-1913 (UK 1900=100)

Foglio2

Foglio3

Third unbundling: tasks within the firmSpitz, 2004, reproduced from Baldwin, Globalisation, the great unbundling(s), 2006

Leads to production fragmentationSource: Oecd, Offshoring and Employment: Trends and Impact, 2007

Joint effect of export and imports mattersFrom Tucci, 2005

Are technological flows still unidirectional?Acquisition of Jaguar and Land Rover by Tata MotorsChairman Tata: his company will not transfer Jaguar and Land Rover production and component sourcing to developing countries

BECOMING AN OUTWARD INVESTOR

China

FDI flows (Million $ and %)

1990-2000

(Annual averages)

2006

Inward

30,104

69,468

Outward

2,195

16,130

Outward/Inward

7,2%

23,2%

Developing countries

Inward and outward stocks (% of GDP)

2000

2006

Inward

9,6%

26,7%

Outward

4,2%

13,9%

Source: Unctad, World Investment Report2007

From Cui and Syed (2007)China: using more domestic inputs in exports

From Cui and Syed (2007)China: and upgrading export sophistication

ConclusionsTechnology transfer strongly affectd by how North/South firms interactUnbundling of production has created extraordinary new opportunities for technology diffusion Technological flows no longer unilateralMany countries or part of countries still excluded

References:Baldwin R., 2006, Globalisation, the great unbundling(s), a report prepared for the Finnish Prime Ministers Office;

Baldwin R. and P. Martin, 1999, Two Waves of Globalisation: Superficial Similarities, Fundamental Differences, NBER Working Paper No. 6904;

Barba Navaretti G., M. Schiff and I. Soloaga, 2006, Weightless Machines and Costless Knowledge: an Empirical Analysis of Trade and Technology Diffusion, in Microfoundations of International Technology Diffusion, edited by B. Hoekman and B. Smarzynska, Washington: World Bank and Plagrave Macmillan;

Barba Navaretti G., M. Galeotti and A. Tucci, 2002, Do Not Get Trapped into Crossing: Indian Firms and Foreign Markets, Centro Studi Luca d'Agliano Development Studies Working Paper No. 170;

Coe D. and E. Helpman, 1995, International R&D Spillovers, NBER Working Paper No. W4444;

Cui L. and M. Syed, 2007, The Shifting Structure of Chinas Trade and Production, IMF Working Paper No. 214;

Oecd, 2007, Offshoring and Employment: Trends and Impact;

Smarzynska Javorcik B., 2004, Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages, American Economic Review 94 (3);

Tucci A., 2005, Trade, Foreign Networks and Performance: a Firm-Level Analysis for India, Centro Studi Luca d'Agliano Development Studies Working Paper No. 199;

UNCTAD, 2007, World Investment Report.