Re-examining International Technological-Knowledge Diffusion

Abstract

In the standard models of North-South technological-knowledge diffusion, the larger the initial technological-knowledge gap between countries, the greater the Southern catching up. However, this result does not adjust well to Southern reality as a whole. The purpose of this paper is to demonstrate that the disparity between the theoretical outcome and the empirical findings can be reduced by considering that: (i) the South can only imitate Northern technological knowledge when it is sufficiently close to the Northern frontier; (ii) the advantage of the South's moderate backwardness, together with its imitation capacity, is a mechanism of catching up with the North; and (iii) the Southern catching-up specification can be country specific. In particular, we show that the behavior of the South's relative level of employed human capital affects Southern imitation capacity and depends on the catching-up specifications.

Keywords:

• North-South
• R&D
• Human capital
• convergence
• numerical computations

Acknowledgements

We are grateful to the anonymous referees whose valuable comments improved this paper.

Notes

¹As will be seen below, the profit maximizing by monopolist producers of intermediate goods implies that p(j) is independent of j.

²It can be shown that X in equation (5) is also expressible as a function of Q and H _w .

³This learning effect (learning-by-past R&D) is different from the conventional learning-by-doing. For a combination between learning-by-doing and R&D activity see, for example, the recent work of Iyigun (2006).

⁴Regardless of the intermediate good, the Southern highest quality rung, k _S , remains lower than in the North, k _N , since at each point in time not all innovations have been imitated yet.

⁵By considering this factor, we are able to explain not only the growth process of innovator countries, but also the growth process of imitator countries (in line with, for example, Papageorgiou, 2003).

⁶We will use the dot above a variable to denote a time change in that variable.

⁷As there is no international trade in our model, equations (18a) and (18b) show that there are no feedback effects between countries.

⁸Indeed, bearing in mind equations (5), (6) and (19a) for the North and (19b) for the South, and the second footnote, C is expressible as a function of Q and H _w .

⁹Since in our model there are no feedback effects between countries.

¹⁰More specifically, by considering the human capital market equilibrium, the free-entry condition into R&D, the individual utility maximization with individual optimal time allocation and that the North is in steady state, we will be able to characterize the Southern transitional dynamics.

¹¹That is, to characterize the transition path for the South, we need to consider the representative domestic intermediate good (defined as the average domestic intermediate goods).

¹²By, for example, taking into consideration the catching-up specification CU ₁(t).

¹³For example, the capital gains (see equation (24)) are only present during the transitional phase.