Foreign Technology Adoption as a Flying Propeller

Yunfang Hu, Takuma Kunieda, Kazuo Nishimura and Ping Wang

No 31159, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We construct a dynamic general equilibrium model of foreign direct investment (FDI) and foreign technology adoption, incorporating adoption barriers, international technology spillover, and relative price advantages. A higher FDI conversion efficacy, a lower adoption barrier, or a stronger international technology spillover, together with a lower relative price of FDI, can propel an economy to exhibit a flying geese paradigm escaping from a middle-income trap and catching up with the world frontier. We calibrate the model to eight representative Asian economies, including Asian Tigers and less-developed countries. Growth accounting exercises show that total factor productivity, FDI conversion efficacy, and foreign technology spillover drive Asian Tigers’ growth miracle, whereas a reduced adoption barrier and a favorable relative price of FDI are more crucial for the growth of less-developed Asian economies. The counterfactual analysis confirms that technology-embodied FDI serves as a flying propeller, explaining almost two-thirds of their economic growth.

JEL-codes: E20 F21 O40 (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-int, nep-mac and nep-sea
Note: DEV EFG ITI
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