Understanding North South technological flows From macro to micro Giorgio Barba Navaretti University of Milan and Centro Studi Luca d’Agliano World Bank, Knowledge Economy Forum VII Ancona June 17, 2008

Structure of presentation First and second unbundling: From polarization (from 1750 to 1950) to technology transfer Channels of North South transfer: Trade Fdi Increasing emphasis on the role of the firm => Beyond representative agent Third unbundling Fragmentation of production Geography of technology flows changes

First unbundling: markets from production

Second unbundling:ideas from production and markets

Channels for technology transfer Trade Coe-Helpman (1995) onwards Knowledge content of trade FDI: analysis of spillovers Blomstrom et al in the 80s on developing countries BUT MOSTLY IN THE AGGREGATE

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

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

The firm Trade: FDI Beyond the representative agent Studies by James Tybout and others Self selection vs. learning by exporting? What characteristics of the firm strengthen the link between export and productivity? FDI What’s 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 rises From Barba Navaretti, Tucci and Galeotti, 2002

Backward linkages matter

Third unbundling: tasks within the firm Spitz, 2004, reproduced from Baldwin, ‘Globalisation, the great unbundling(s)’, 2006

Leads to production fragmentation Source: Oecd, “Offshoring and Employment: Trends and Impact”, 2007

Joint effect of export and imports matters From Tucci, 2005

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

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

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

Conclusions Technology transfer strongly affectd by how North/South firms interact Unbundling of production has created extraordinary new opportunities for technology diffusion Technological flows no longer unilateral Many countries or part of countries still excluded

References: Baldwin R., 2006, Globalisation, the great unbundling(s), a report prepared for the Finnish Prime Minister’s 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 China’s 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.