GEP Research Paper 08/34
Can Trade Really Hurt? An Empirical Follow-up on Samuelson’s Controversial Paper
Jürgen Bitzer, Holger Görg and Philipp J.H. Schröder
Summary
Based on trade and investment data from 17 OECD countries this paper provides the first evidence that outward knowledge spillovers through exports and foreign direct investment do occur and that these spillovers can potentially harm the export and investment sending country.
Abstract
This paper investigates Samuelson's (JEP, 2004) argument that technical progress of the trade partner may hurt the home country. We illustrate this prospect in a simple Ricardian model for situations with outward knowledge spillovers. Within this framework Samuelson's Act II effects may occur. Based on industry level panel data for seventeen OECD countries for the period 1973 to 2000 we show econometrically that the outflow of domestic knowledge via exports or FDI may have a negative impact on industry output in the home country. This is particularly so when exporting to technologically less advanced countries and, more specifically, China..
JEL classification: F10, F11, F14, O30
Keywords: International R&D spillovers, export driven spillovers, outward foreign direct investment
Issued in September 2008
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