Michelle P. Connolly

The dual nature of trade: measuring its impact on imitation and growth

Imports of goods that embody foreign technology raise a countrys output directly as inputs into production and indirectly through reverse-engineering of these goods, which contributes to domestic imitation and innovation. This paper first quantifies spillovers from high-technology imports from developed countries to domestic imitation and innovation in both developed and developing countries. It then considers the contribution of foreign and domestic innovation to real per capita GDP growth. ; International patent data for forty countries from 1970 to 1985 are used to create proxies for imitation and innovation. High-technology imports, as well as quality-adjusted research and the size of the economy, positively affect both domestic imitation and innovation. Transportation and communication infrastructure positively affects imitation, but does not appear to play a role in innovation. Interestingly, foreign direct investment, often considered an important mechanism for technological diffusion to developing nations, does not significantly affect either domestic innovation or imitation. Finally, while both foreign and domestic innovation contribute positively to real per capita GDP growth, foreign technology from developed countries appears to play a far greater role in growth than domestic technology.

North-South Technological Diffusion: A New Case for Dynamic Gains from Trade

The transitional dynamics for both a developed and a less developed country are derived when North-South trade leads to technological diffusion through reverse engineering of intermediate goods in a quality ladder model of endogenous growth. Domestic technological progress occurs via innovation or imitation, while growth is driven by technological advances in the quality of domestically available inputs, regardless of country of origin. The concept of learning-to-learn is incorporated into both imitative and innovative processes. International trade with imitation leads to feedback effects between Southern imitators and Northern innovators who compete for the world market. Hence, both countries face transition paths dependent on the relative technologies in the two countries. For reasonable parameter values, the rates of innovation and imitation are both falling in transition to steady-state and yet remain above that under autarky. Increased interaction between the North and the South, through increased openness to imports of Northern intermediate goods, leads to higher world growth, demonstrating dynamic benefits to the South of increased trade with a more developed country. The transition to steady-state in which the rate of innovation in the developed country falls as the developing country reduces the technology gap between the two countries may explain the apparent recent slowdown of total factor productivity growth in OECD countries over the last 30 years.

Implications of intellectual property rights for dynamic gains from trade

A simple intellectual property rights (IPRs) framework is introduced into a dynamic quality ladder model of technological diffusion between innovating firms in one country and imitating firms in another country. The presence of technological spillovers and feedback effects between firms in the two countries demonstrates that, even when steady state growth increases, transition costs sometimes dominate steady state welfare gains. Most existing models of international IPRs find that high intellectual property enforcement in the imitating country leads to welfare gains in the innovating country at the expense of the imitating country. In contrast, we find IPR regimes that, even after accounting for transition costs, positively affect welfare in both countries. Preferred IPR regimes maintain competition from imitative activity but enforce some remuneration to innovators for the spillovers they generate. Well-designed IPR regimes imposed at the time of trade liberalization will be welfare enhancing for both regions relative to trade liberalization without IPR enforcement.

Human Capital and Growth in the Postbellum South: A Separate but Unequal Story

This article tests the importance of human capital in explaining convergence across the states from 1880 to 1950. Human capital matters to a states income level and to its growth rate through technological diffusion. The South, whose overwhelmingly agricultural society relied more heavily on work experience than formal education, and whose racial discrimination in school resource allocation lowered human capital accumulation of both blacks and whites, presents a unique pattern. The Souths low human capital levels following the Civil War and its active postbellum resistance to education reduced its speed of conditional convergence toward the rest of the nation.

Industry and the Family: Two Engines of Growth

We generalize the class of endogenous growth models in which the scale of the economy has level rather than growth effects, and study the implications of different demographic and technological factors when both fertility choice and research effort are endogenous. The model incorporates two dimensions of technological progress: vertical (quality of goods) and horizontal (variety of goods). Both dimensions contribute to productivity growth but are driven by different processes and hence respond differently to changes in fundamentals. Specifically, while unbounded vertical progress is feasible, the scale of the economy limits the variety of goods. Incorporating a linearity in reproduction generates steady-state population growth and variety expansion. We thus have two engines of growth generating dynamics that we compare with observed changes in demographics, market structure, and patterns of growth. Numerical solutions yield the important insight that, while endogenous, fertility responds very little to industrial policies. Demographic shocks, in contrast, have substantial effects on growth.

How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?

South Koreas growth miracle has been well documented. A large set of institutional and policy reforms in the early 1960s is thought to have contributed to the countrys extraordinary performance. In this paper, the authors assess the importance of one key set of policies, the trade policy reforms in Korea, as well as the concurrent GATT tariff reductions. They develop a model of neoclassical growth and trade that highlights two forces by which lower trade barriers can lead to increased per worker GDP: comparative advantage and specialization, and capital accumulation. The authors calibrate the model and simulate the effects of three sets of tariff reductions that occurred between the early 1962 and 1995. Their main finding is that the model can explain up to 32 percent of South Koreas catch-up to the G7 countries in output per worker in the manufacturing sector. The authors find that the effects of the tariff reductions taken together are about twice as large as the sum of each reduction applied individually.

Improved Reasoning in Undergraduate Writing through Structured Workshops

The Department of Economics at Duke University has endeavored to increase participation in undergraduate honors thesis research while ensuring a high-quality learning experience. Given the faculty-to-student ratio in the department (approximately 1:16), increasing research participation required the creation of a stable, replicable framework for mentoring students through research. The department aimed to make the research experience more consistent and interactive so that students also learned from each other in a group setting. Here, the authors assess the relationship between changes in mentoring support of honors research and students’ scientific reasoning and writing skills reflected in their undergraduate theses. They find that students who participated in structured courses designed to support and enhance their research exhibited the strongest learning outcomes, as measured by systematic writing assessment.

Technological Diffusion Through Trade and Imitation

An endogenous growth model is developed demonstrating both static and dynamic gains from trade for developing nations due to the beneficial effects of trade on imitation and technological diffusion. The concept of learning-to-learn in both imitative and innovative processes is incorporated into a quality ladder model with North-South trade. Domestic technological progress occurs via innovation or imitation, while growth is driven by technological advances in the quality of domestically available inputs, regardless of country of origin. In the absence of trade, Southern imitation of Northern technology leads to asymptotic conditional convergence between the two countries, demonstrating the positive effect of imitation on Southern growth. Free trade generally results in a positive feedback effect between Southern imitation and Northern innovation yielding a higher common steady-state growth rate. Immediate conditional convergence occurs. Thus, trade in this model confers dynamic as well as static benefits to the less developed South, even when specializing in imitative processes.

Sustaining the Goose that Lays the Golden Egg: A Continuous Treatment of Technological Transfer

This paper proposes a simple model of the trade-offs perceived by innovating firms when investing in countries with limited intellectual property rights (IPR). The model allows for a continuous treatment of technology transfer and production cost gains occurring through FDI. While it does not consider possible changes in rates of innovation caused by changes in IPR in developing countries, it allows one to uncover a potentially non-monotonic relationship between welfare and IPR in the recipient country.

The Evolution of U.S. Spectrum Values Over Time

Using data on all FCC auctions of spectrum related to cellular services from 1997 to 2015 we attempt to identify intrinsic spectrum values from winning auction bids. Our analysis includes 15 auctions and close to 7,200 observations. We add two components to previous literature on this topic. First, we control for license and block specific auction rules. Second, we introduce two technological measures to separate out technological progress that effectively reduces spectrum scarcity from technological progress that increases demand for mobile applications. Previous papers have included simple time trends to reflect technological changes. Time trends are unable to distinguish across markets within the United States and conflate the effects of these two types of technological progress. Our results confirm previous theoretical and empirical findings for basic measures of demand such as population, population density, income levels, frequency levels, bandwidth and paired bands. We were surprised that 47 percent of all cellular licenses since 1997 have been won by small bidders: 42 percent were won using small bidder credits, 5 percent were won in set-aside/closed licenses, and 10 percent were won in closed licenses using bidding credits. Adjusting for the value of these licenses, this represents 27 percent of the real dollar value of these licenses. Our results further quantify the negative impact on headline winning bids when won using bidding credits. Increased spectral efficiency appears to be reducing spectrum scarcity as evidenced by its lowering of winning bids. Additionally, auction results confirm that the relative value of higher frequency spectrum is increasing over time.