Fourth Summer School in Trade, Industrialisation, and Development 2005

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1 Fourth Summer School in Trade, Industrialisation, and Development 2005 Gargnano, Italy Trade, Innovation, and Technology Di usion: Implications for Developing Countries Lecture 1: Basic Measures of Innovation, Di usion, and Trade September 2005

2 How should we proceed? A desire is that theory and measurement progress in concert Two failures: 1. Keynesian macroeconomic forecasting models: data without theory. 2. Factor Endowments: Elegant theory that sits awkwardly with the facts

3 More successful: Growth economics.

4 I. The International Trade of Countries: The Gravity Equation X ni X n Y i ni X ni = X ny i ni Notation purchases by n from i total purchases by n total production by i distance measure constant (unit dependent)

5 Evidence 1. Total Imports and Market Size: vs

6 imports, I_n ($ billions) GER BEL NET CAN ITA UNK FRA JAP SWE NOR DEN AUT SOU SPA AUL MEX BRA SINIRN VEN NIALG ISR INDARG INO KOR GREFIN HUN CZE MAY IRE POR POL THA PHI NZE CHN TUR SAU LIY CHI PAN MOR EGY COL KUW PAKPER LEB JAM IRQ SUD GHA COTKEN MOZ ECU CAM TUN COS ELS GUA TRI CYPSRI DOM PAP SYR BOL SEN MAD JOR HONIC ICE BAN MAT ETH URU BAB FIJ UGA GABSIEBEN MAW MAS SOMTOG PAR NEP GUN USA.01 ZIM total absorption, X_n ($ billions) Figure 1: Imports and Market Size,

7 1000 USA imports, I_n ($ billions) GER FRA UNK NET CANITACHN KOR MAY THA TAI SPA SWE AUT SWI AUL BRA DEN IRE NOR ISR SAUTURINO PHI POR POL GREFIN SOUARGIND HUNCHI PAN NZE EGY VEN COL KUW ALG TUN MOR PAK ROM IRN PER OMA DOM NIA CYPAR LEB ECU COS URU ELS JOR GHA JAM COT ANG MAS ZIM GUA BAN SYR MATSRI BUL BAR HON ICE TRI BOL KEN PAP YEM GAB ALB NIC CAB CAM SEN BEN BAB SUD MOZ TOGMAD MAU MAI FIJ ZAM NEP UGA MAW LAO GUN AFG NIG BEZ DJI SEY MON BUK COM SIECEN CHA RWA BUR JAP BHU total absorption, X_n ($ billions) Figure 2: Imports and Market Size,

8 2. Bilateral Exports and Production

9 stat stat2 1 market share of i in country n, X_ni/X_n e e e gross production of exporter, Y_i ($ billions) Figure 3: Bilateral Exports and Production,

10 3. Bilateral Trade and Distance: vs X ni X in X nn X ii vs. distance

11 1 bilateral trade index, sqrt((xni*xin)/(xii*xnn)) e e distance between countries (kilometers) Figure 4: Bilateral Trade and Distance,

12 1 bilateral trade index, sqrt((xni*xin)/(xii*xnn)) e e distance between countries (kilometers) Figure 5: Bilateral Trade and Distance,

13 II. The International Trade of Firms 1. Markets and French Firm Penetration

14 estimate of firms entering market (thousands) SIE GER AUL UNK SWI CHN BRA AUT TAI GEE ITA FRA DENBEL NET SPA NZE BUL NOR CZE FIN ROM SWE YUG ISR SOU ARG MEXKOR IND MAY IRE GRE VIE HOK HUN VEN CHIPOR SINSAU CUB TUR IRN COL ALG EGY ZIM SUD ECU CAM COT PER INO ALB MOR TAN COS PAN SYRPHI TRI URU PAK TUN BUK SEN GUA ETH ELS DOM JORKUW THA SRI BOLPAR HON JAM ZAI IRQ PAP OMA BAN NIA TOG ANG SOM MAS LIY CHA MAL KEN RWA BEN MAD NEP UGA NIC BUR NIG MOZ CEN ZAMGHA LIB MAU AFG MAW market size ($ billions) Figure 7: Entry and Market Size CAN JAP USR USA

15 2. French Firms and Market Penetration

16 firms penetrating at least that many markets number of markets penetrated Figure 6: Frequency of Selling in Multiple Markets

17 3. Market Penetration and Size in France

18 average sales in French market ($ millions) firms selling to k or more markets Figure 8: Firm Size and Frequency of Multiple Markets

19 1. Innovation Measures III. Innovation Around the World

20 Greece New Zealand Iceland Mexico Slovak Republic Hungary Portugal Figure 8: Industry Financed Business Enterprise R&D Canada Italy Sweden Netherlands Belgium Australia Spain Finland Denmark Austria Norway Czech Republic Ireland Turkey Poland France Korea United Kingdom United States Japan Germany percent of OECD total

21 TABLE 2 Business Sector Research Scientists (per 1000 Industrial Workers) COUNTRY Scientists Income Population Finland United States Japan Sweden Luxembourg Russia Belgium Norway Canada Germany Singapore France Denmark Ireland Korea United Kingdom Taiwan Austria Netherlands Australia Slovenia Spain New Zealand Italy Slovak Republic Czech Republic Hungary Romania Poland Portugal China Greece Turkey Mexico Data are for 2000 or the previous available year Income is relative to the United States (100) Population is in 1000's Sources: OECD (2004) and Heston, Summers, and Aten (2002).

22 2. Patenting Measures

23 Figure 9: R&D and Patents R&D expenditure patents granted by the United States Patent Office

24 Spain Norway Singapore Denmark China, Hong Kong Austria Figure 10: Foreign Patenting in the United States Korea Italy Sweden Rest of World Switzerland Netherlands Israel Belgium-Lux. Australia Finland Canada United Kingdom France Taiwan Germany Japan US patents granted to residents in 2000 (% of total foreign)

25 DE JP US patenting in Germany (DE) BG TR SK LI PT PL CZ GR LU HU ES NO IE NZ ZA RU BR CN IN AT FI BE DK AU IL CH NL IT SE FR GB KR CA 1 RO ARMX patenting in the United States (US) Figure 11: Sources of Patents

26 DE patenting by Germany (DE) MD BY AL EE UZ MK FR IT GB AT CHES NL BE SE JP DK PT GR IE LUCN AU FI KR CA CZ RU MX PL HU MC NO NZ SITR SKUA IL LT AR BG LV RO KZ VN GE US AM LSZ SDMW UG KE 1 SG BA IS TJKG MN patenting by the United States (US) Figure 12: Markets for Patents

27 3. Bilateral Patenting and Distance: P ni P in P nn P ii vs. distance

28 bilateral patenting index sqrt((gni*gin)/(gii*gnn)) distance between countries (km) Figure 13: Bilateral Patenting and Distance

29 IV. The Evolution of Productivity: Growth as a Global Phenomenon

30 Figure 14: Evolution of Productivity in High Productivity Countries 100,000 10,000 GDP per capita 1, year United States Norway Ireland Denmark Canada Switzerand Australia Netherlands France Belgium Japan Sweden Finland Austria United Kingdom 13 small Italy Germany Taiwan New Zealand Spain South Korea Portugal Greece

31 Figure 15: Evolution of Productivity in Low Productivity Countries 100,000 10,000 GDP per capita 1, year United States Chile Czechoslovakia Venezuela Argentina Malaysia Uruguay Hungary Mexico Costa Rica Turkey Brazil Colombia USSR Yugoslavia Peru China Sri Lanka Guatemala Indonesia El Salvador Cuba Philippines Honduras India Nicaragua

32 Challenges for Theory 1. Accommodating Market Segmentation and Geography 2. Reconciling Aggregate and Producer-Level Data 3. Modeling Specialization in Innovation and Technology Di usion 4. Explaining the Geography of Economic Growth

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