Do Capital Inflows Spur Technology Diffusion? Evidence from a New Technology Adoption Index
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Summary:
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.
Series:
Working Paper No. 2024/044
Subject:
Balance of payments Capital account Capital account liberalization Capital flows Imports International trade Technology
Frequency:
regular
English
Publication Date:
March 1, 2024
ISBN/ISSN:
9798400269509/1018-5941
Stock No:
WPIEA2024044
Format:
Paper
Pages:
49
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