Do Capital Inflows Spur Technology Diffusion? Evidence from a New Technology Adoption Index

Gabriela Cugat and Andrea Manera

No 2024/044, IMF Working Papers from International Monetary Fund

Abstract: We construct a novel measure of technology adoption, the Embodied Technology Imports Indicator (ETI), available for 181 countries over the period 1970-2020. The ETI measures the technological intensity of imports of each country by leveraging patent data from PATSTAT and product-level trade data from COMTRADE. We use this index to assess the link between capital flows and the diffusion of new technologies across emerging economies and low-income countries. Through a local projection difference-in-differences approach, we establish that variations in statutory capital flow regulations increase technological intensity by 7-9 percentage points over 5 to 10 years. This increase is accompanied by a significant 28-33 pp rise in the volume of gross capital inflows, driven primarily by foreign direct investment (21 pp increase), and a 9 to 12 percentage points shift in the level of Real GDP per capita in PPP terms.

Keywords: Technology measurement; Technology diffusion; Capital flows; Capital account openness.; IMF working paper No. 2024/44; ETI indicator; liberalization episode; technology score; natural logarithm; standard deviation; Capital account liberalization; Imports; Capital account; Global (search for similar items in EconPapers)
Pages: 49
Date: 2024-03-01
New Economics Papers: this item is included in nep-fdg, nep-ino, nep-int, nep-opm and nep-tid
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