Essays on international productivity growth and technological diffusion

This dissertation has three chapters. In the first chapter, "The Diffusion of Externalities from Foreign Direct Investment," the pattern of spillover diffusion in a general equilibrium stochastic model is derived. As predicted by theory, productivity growth of domestic manufacturers in the host country is not found to rise with FDI in the manufacturers' own sector. The absence of intra-industry externalities stems from the multinational corporation's strategy to avoid irritation by the competitive fringe in the host country. Also, when the multinational corporation outsources, it transfers technical knowledge to increase the productivity growth of upstream suppliers, thus inducing inter-industry spillovers. The results from the estimation of externalities across sectors show that FDI can be a good channel of technology transfer, thereby complementing rather than substituting capital formation by domestic manufacturers.; In the second chapter, "Productivity Growth and Financial Development," the evidence shows the role of financial intermediaries in promoting innovative investment to differ internationally. For example, multinational corporations can have access to better financial intermediation than competitors in the host country. The positive correlation between financial development and productivity growth from cross-country studies is found to hide substantial heterogeneity across countries. Even for a relatively homogenous simple of OECD countries, time series analysis reveals a wide variety of dynamic interaction patterns among the real and financial sectors.; The third chapter, "Innovation, Imitation and International Trade under Nonhomothetic Preferences," has a model where technological diffusion is channeled through international trade. Both innovators and imitators are monopolistic competitors facing demand from consumers with nonhomothetic preferences, where the most recently introduced goods have the highest income elasticity of demand. While other research considers the impact of international inequality on trade, the effect of national inequality has been neglected in both theoretical and empirical studies of trade. Inequality in a less developed country has two offsetting effects on trade with a more industrialized country. It can induce a rise in imports, but also a contraction in exports. Estimation of bilateral trade flows, including national inequality and using panel techniques to control for heterogeneity, shows robustly that more inequality in a trading partner country reduces trade.