Three essays on international trade and productivity

Empirical research on R&D spillovers over the last decade suggests significant R&D spillovers through imports both in developed and developing countries. In the first chapter, entitled "Trade in Capital Goods and Foreign R&D Spillovers: Reconsidering the Evidence," I show that previous studies contain a misspecification problem, which precludes the estimation of meaningful partial effects of foreign R&D. When a correctly-specified regression model is used, evidence of foreign R&D spillovers is found for OECD countries, but not for developing countries. I interpret this finding as evidence that R&D efforts in advanced countries are directed towards capital goods that complement their abundant factors of production, and leave relatively unaffected developing countries that have different factor endowments.; The second chapter, entitled "Appropriate Technology and Technological Spillovers: A Production-Frontier Approach," empirically investigates the sources of productivity differences across countries. I adopt the production-frontier approach (Fare et al., 1994) to construct Malmquist productivity indexes for a sample of 75 countries. I find that countries with relatively higher capital-labor ratios benefit more from technological progress. The extent of technology spillovers is determined by a country's human capital endowment gap relative to its trading partners. I also show that the production-frontier analysis could be a useful complement to the traditional growth accounting method in many empirical economic growth studies.; The title of the third chapter is "Income, Trade and Technology in Vertically-differentiated Markets: An Illustrative Model." In this chapter, I present a simple model that accounts for firms' decisions whether to direct their R&D expenditure towards product innovation or towards process innovation. I show that, as the consumers' income in an economy grows, a firm's incentive for product innovation relative to process innovation also increases. Compared to the closed economy case, the increase in the incentive for product innovation induced by the domestic income growth is lower under free trade. Finally, I argue that the incentive to upgrade product quality becomes lower as the product quality gap relative to its trading partner becomes larger.