Transcript Globalization and Technology Diffusion Richard Newfarmer Special Representative to the WTO and UN World Bank March 10, 2008

Globalization and Technology
Diffusion
Richard Newfarmer
Special Representative
to the WTO and UN
World Bank
March 10, 2008
Key Points
 Technology is a main driver of growth, often accounting
for more than half of the increase in per capita incomes
 The technology gap between rich and poor countries is
large but narrowing – as developing countries adopt
and adapt pre-existing technologies
 Globalization has been a main driver of technological
progress
 Taking advantage of global opportunities requires
overcoming weaknesses in technological absorptive
capacity
Why is technological progress important? … it is
central to income growth and poverty reduction
Average annual per capita income and total factor productivity growth,1990-2005
8
Per capita income growth
7
6
TFP growth
5
4
3
2
1
0
East Asia &
Pacific
Europe &
Central Asia*
Latin America Middle-East &
& Caribbean
North Africa
* Data for Europe & Central Asia cover period 2005/1995
Source: World Bank, Poncet 2006
South Asia
Sub-Saharan
Africa
Why is technology important? … it is the main driver
of fast growth
Growth Rates Per Capita, by Decile, 1980-92:
Contribution of Technology and Capital
7
6
Share of technology (TFP) in growth
5
4
Share of capital in growth
3
2
1
0
-1
-2
-3
-4
1
2
3
Slowest growing
Source: Easterly and Levine, 2001
4
5
6
7
8
9
10
Fastest growing
Key Points
 Technology is a main driver of growth, often accounting
for more than half of the increase in per capita incomes
 The technology gap between rich and poor countries is
large but narrowing – as developing countries preexisting technologies
Technology gap: still wide but narrowing
Index of technological achievement: Level compared to
high-income countries (=100)
60
2000s
50
1990s
40
30
20
10
0
Upper Middle Income Lower Middle Income
Source: World Bank, Global Economic Prospects (2008)
Low Income
Technological progress in developing countries
has outpaced high-income countries
Percent change in technological achievement, 2000s vs 1990s
180
160
140
120
100
80
60
40
20
0
High Income
Upper Middle
Income
Lower Middle
Income
Source: World Bank, Global Economic Prospects (2008)
Low Income
Increased penetration of older technologies
drives the rise in technological achievement in
developing countries
Increase in summary index, relative to high-income increase=100
600
500
400
300
200
100
0
Scientific innovation
Older technologies
Upper-middle
Lower-middle
Recent technologies
Low income
Source: World Bank, Global Economic Prospects (2008)
Developing countries are moving up the
technology ladder… as evidenced in exports
Low income countries: Share of
exports, 1981-2001 (percent)
Middle income countries: Share of
exports, 1981-2001 (percent)
100
90
90
80
70
60
50
40
30
20
2001
10
1981
0
80
70
60
50
40
30
20
10
0
Resourcebased
Low tech
Medium
Tech
High tech
2001
1981
Resource-based
Low tech
Source: World Bank, Global Economic Prospects, 2004
Medium Tech
High tech
Key Points
 Technology is a main driver of growth, often accounting
for more than half of the increase in per capita incomes
 The technology gap between rich and poor countries is
large but narrowing – as developing countries preexisting technologies
 Globalization has been a main driver of technological
progress
Globalization is a key driver of technology transfer
Trade
• Import competition (Hoekman and Javorcik 2007; Amity, 2007)
• R&D content of imports (Coe, et al, 1997)
High-tech Imports (% of GDP)
10
Upper-middle
8
Lower-middle
6
4
Low income
2
0
1993
1996
1999
2002
Total Factor
Productivity
Globalization is a key driver of technology transfer
Trade
• Import competition (Hoekman and Javorcik 2007; Amity, 2007)
• R&D content of imports (Coe, et al, 1997)
• Exports (?) (Kraay, 2007)
FDI
• Direct transfers (Hoekman and Javorcik, 2007)
• Spillovers (?) (Djankov and Hoekman, 2007)
• Competition (Pack, 2007)
Total Factor
Productivity
Globalization is a key driver of technology transfer
Trade
• Import competition (Hoekman and Javorcik 2007)
• R&D content of imports (Coe, et al, 1995)
• Exports (?) (Kraay, 2007)
FDI
FDI (% of GDP)
Total Factor
Productivity
5
Upper-middle
4
3
Lower-middle
2
Low income
1
0
1990
1993
1996
1999
2002
2005
Globalization is a key driver of technology transfer
Trade
• Import competition (Hoekman and Javorcik 2007; Amity, 2007)
• R&D content of imports (Coe, et al, 1995)
• Exports (?) (Kraay, 2007)
FDI
• Direct transfers (Hoekman and Javorcik, 2007)
• Spillovers (?) (Djankov and Hoekman, 2007)
• Competition (Pack, 2007)
Direct Access
• Internet
• Purchase via patents
Diaspora and Migration
Total Factor
Productivity
Key Points
 Technology is a main driver of growth, often accounting
for more than half of the increase in per capita incomes
 The technology gap between rich and poor countries is
large but narrowing – as developing countries adopt
and adapt pre-existing technologies
 Globalization has been a main driver of technological
progress
 Taking advantage of global opportunities requires
overcoming weaknesses in technological absorptive
capacity
GEP08’s four dimensions of absorptive
capacity…




Macroeconomic environment
Financial structure and intermediation
Regulatory environment and governance
Basic and advanced technological literacy
Messages:
• Improvements in macro and finance
• Slower progress in regulation and literacy
• Lags in capacity may begin to constrain
technology achievement
For example, technology literacy raises the
productivity of FDI and its contribution to growth…
Per capita GDP
growth rate
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
High
Medium
Low
High
Medium
Schooling
Low
FDI to GDP ratio
Note: The low, medium, and high categories for FDI to GDP ratio are below 0.01%, 0.01%-0.2%, and over 0.2% respectively. For the
schooling variable, the low, medium, and high categories are below 0.4, 0.4-1.0, and over 1.0, respectively
Source: Borensztein et al (1998)
Despite high enrolment rates, few students
pass standardized tests (2000s)
Sixth graders
Fourth graders
% of relevant
population
Enrolment
Meet standard
100
80
60
40
20
0
South
Africa
Uganda
Namibia
Malawi
Turkey
Sources: SACMEQ II (2000), PIRLS (2001), and DHS
Argentina Colombia Morocco
Weak Absorptive capacity may begin to
constrain further technological progress
Technological achievement versus per capita income by region (early 2000s)
0.2
0.18
All countries
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
0
5000
10000
East Asia & Pacific
Middle East & North Africa
High income OECD
Log. (All)
15000
20000
25000
30000
Europe & Central Asia
South Asia
High income Other
Source: World Bank, Global Economic Prospects (2008)
35000
40000
Latin America & Caribbean
Sub-Saharan Africa
All
Weak Absorptive capacity may begin to
constrain further technological progress
Technological achievement versus per capita income by region (early 2000s)
0.2
0.18
Europe & Central Asia
0.16
All countries
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
0
5000
10000
East Asia & Pacific
Middle East & North Africa
High income OECD
Log. (All)
15000
20000
25000
Europe & Central Asia
South Asia
High income Other
Log. (Europe & Central Asia)
30000
Source: World Bank, Global Economic Prospects (2008)
35000
40000
Latin America & Caribbean
Sub-Saharan Africa
All
Weak Absorptive capacity may begin to
constrain further technological progress
Technological achievement versus per capita income by region (early 2000s)
0.2
0.18
Europe & Central Asia
0.16
All countries
0.14
0.12
0.1
0.08
Latin America & Caribbean
0.06
0.04
0.02
0
0
5000
10000
East Asia & Pacific
Middle East & North Africa
High income OECD
Log. (All)
15000
20000
25000
Europe & Central Asia
South Asia
High income Other
Log. (Latin America & Caribbean)
30000
35000
40000
Latin America & Caribbean
Sub-Saharan Africa
All
Log. (Europe & Central Asia)
Source: World Bank, Global Economic Prospects (2008)
Key features of a pro-technology policy stance
 Each country must customize its technology policy to suit its
particular circumstances…
 But in general policies with the greatest long term effects include:
– Openness to trade, foreign direct investment and participation
of diaspora
– Sound investment climate so as to allow innovative firms to
flourish
– Steady investment in basic infrastructure (roads, electricity,
telephony)
– Raise the quality and quantity of education throughout
economy not just major centers
– Pro-active policies: reinforce dissemination systems, increase
the market-orientation of R&D programs, other
References and further reading
This presentation is adapted from that of the Global Economic Prospects 2008
team, led by Andrew Burns, World Bank
Amity, Mary and J. Konings 2007 “Trade Liberalization, Intermediate Inputs, and
Productivty: Evidence From Indonesia”, American Economic Review 97:5 pp 1611-1638
Borenstein, Eduardo, J. de Gregirio, andJ. W. Lee 1998 “How does Foreign Direct
Investment Affect Economic Growth?” Journal of International Economics 45 (1): 115-35
Coe, David, E. Helpman and W. Hoffmaister, 1997. “North South R&D Spillovers
Economic Journal 107 (January 134-149)
Djankov, Simeon and Bernard Hoekman 2007 “Market Discipline and Corporate
Efficiency:Evidence from Bulgaria” in Hoekman and Javorcik, 2007 (cited below).
Easterly, William and Ross Levine “Its not Factor Accumulation: Stylized Facts and
Growth Models” World Bank Economic Review Vol. 15 No 2 pp 177-219
Fink, Carsten, A. Matoo, and R. Rathindran 2002 “Liberalizing Basic
Telecommunications: Evidence from Developing coutnries: World Bank Working Paper:
Washington DC
Hallward-Dreimeirer, Mary and G. Iarossi, and K. Sokoloff 2002. “Exports and
Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data”
National Bureau of Economic Research Working Paper no. 8894 Cambridge, Mass.
Hoekman, Bernard and Beata S. Javorcik, 2007. (eds.) Global Integration and
Technology Transfer Palgrave-McMillan and World Bank: Washington DC
References and further reading
(con’d)
Kraay, Aart 2007 “Exports and Economic Performance: Evidence from a Panel of
Chinese Enterprises” in Hoekman and Javorcik, 2007 (above).
Pack, Howard “Econometric versus Case Study Approaches to Technology Transfer” in
Hoekman and Javorcik ,2007 (cited above)
Poncet, Sandra 2006 “The long-Term Growth Prospects of he Wrold Economic Horizon
2050 Working Paper 2006-16 Centre d’Etudes Prospectives et d’Informations
Internationale
World Bank, Global Economic Prospects 2003: Investing to Unlock Global Opportunities
World Bank: Washington
World Bank, Global Economic Prospects 2004: Realizing the Development Promise of
the Doha Agenda World Bank: Washington DC.
World Bank Global Economic Prospects 2008: Technology Diffusion in the Developing
World World Bank: Washington DC.
Technology diffusion in the
developing world
For more info:
GEP:
http://www.worldbank.org/gep2008
Trade:
http://www.worldbank.org/trade