Absorption Capacity, Structural Similarity and Embodied Technology Spillovers in a "Macro" Model: An Implementation Within a Computable General Equilibrium Framework

In: Korean journal of policy studies: KJPS, Volume 16, Issue 1, p. 111-132

Open Access

Abstract

In this paper, all technology transfers are embodied in trade flows within a three-region, one- traded-commodity version of the GTAP model. Exogenous Hicks-Neutral technical progress in one region can have uneven impacts on productivity elsewhere. Why? Destination regions' ability to harness new technology depends on their absorptive capacity and the structural congruence of the source and destination. Together with trade volume, these two factors determine the recipient's spillover coefficient (which measures its success in capturing foreign technology). Armington competition between the outputs of the three economies and shifts in their terms of trade loom large in the general equilibrium adjustment. This has implications for public policy in the context of human capital formation, role of education especially for the developing economies like the East-Asian countries.