Catching up of emerging economies: the role of capital goods imports, FDI inflows, domestic investment and absorptive capacity

Abstract

We show that the impact of capital goods imports and FDI inflows on economic convergence depends on the local capacity of emerging economies to absorb superior technologies.

Keywords:

• Total factor productivity
• imports
• foreign direct investment
• absorptive capacity
• BRICs

JEL Classification:

• F21
• F14
• O47

Acknowledgement

We thank Frank Pothen for providing the TFP data.

Notes

¹ For surveys of the relevant literature, see Saggi (2002) and Keller (2004).

² While earlier studies typically focus on either imports or FDI, Yasar and Morrison Paul (2007) and Blind and Jungmittag (2004) provide notable exceptions. See Supplement A for a list of advanced source countries.

³ See Hübler and Pothen (2013) for details on the TFP calculation and Supplement B for detailed definitions of variables.

⁴ Import and output (GDP) data are taken from the WIOD database (http://www.wiod.org/new_site/data.htm), while FDI data are taken from the OECD database (http://stats.oecd.org/index.aspx?DataSetCode=CRS1) with missing entries filled where appropriate with UNCTAD data (http://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx?sCS_ChosenLang=en).

⁵ See Supplement B, Table B1, for the PCA.

⁶ See Supplement C for summary statistics.

⁷ Detailed results are presented in Supplement D.