In search of FDI-transmitted R&D spillovers: A study based on Swedish data

In Search of FDI-Transmitted R& D Spillovers: A Study Based on Swedish Data. — This paper analyzes empirically whether inward and outward foreign direct investment (FDI) work as channels for international R&D spillovers. The authors utilize firm-level and industry-level data for Swedish manufacturing. Hardly any evidence of FDI-related R&D spillovers is found. But while the results do not provide support for the hypothesis that the activity level of MNEs’ affiliates matters for the extent of FDI-transmitted international spillovers, they suggest that utilizing foreign affiliates’ employment as a weighting scheme may be too crude a measure. The authors’ analysis shows indeed that the type of activity — R&D or assembly — carried out in the affiliates matters significantly for technology sourcing.     

Relative wages and trade-induced changes in technology

We develop a model where trade liberalization leads to skill-biased technological change, which in turn raises the relative return to skilled labor. When firms get access to a larger market, the relative profitability of different technologies changes in favor of the more skill-intensive technology. As the composition of firms changes to one with predominantly skill-intensive firms, the relative demand for skilled labor increases. This way, we establish a link between trade, technology and relative returns to skilled and unskilled labor.     

Growth and Trade vs. Trade and Growth

In the traditional trade literature, there is a well-developed area analyzing the effect of growth on trade and its reflection on income growth. This literature developed already in the 1950s and 1960s. Generally speaking, an interest in the effects of trade on growth has also existed for many years, where trade has often been viewed as an engine of growth. Cases in point are the "East Asian Tigers" and Japan which have especially benefited from outward-looking policies. In this paper, we analyze the relationship between economic growth and growth in income terms of trade, arguing that income terms of trade is a useful concept in analyses of the link between trade and growth. Our results suggest that fast-growing countries have either specialized in sectors with a relatively favorable development with regard to world market prices, or they have managed to successively improve quality within sectors, thereby avoiding falling terms of trade in spite of large increases in export volumes.