Essays in innovation, technology diffusion and globalisation

Abstract

I explore the implications of an increasingly integrated world economy on production patterns, levels of innovation activity and technology diffusion, and welfare across countries in a series of three essays. First, I analyse the gains from openness to international trade and multinational production (MP) across countries in a general equilibrium framework where innovation activity and technology are endogenously determined. The gains from openness to trade and MP implied by the calibrated model are in general much larger than the gains previously reported in the literature, reflecting productivity gains from inward MP, additional profits to multinationals and their affiliates around the world from outward MP, and the benefits of specialisation across production and research activities. Second, I examine the role of international trade in spreading the benefits of technology embodied in machinery and equipment around the world and the contribution of different country characteristics that promote or inhibit these benefits. The results explain why the International Comparison Program's data on equipment prices tend not to fall with levels of development across countries. Third, I examine the empirical relevance of Rybczynski effects, skills biased technical change, and increased global production sharing in explaining Israel's adjustment to immigration of Russian Jews in the 1990s. My findings provide new evidence that all three mechanisms played an important role in Israel's adjustment. The conclusions of this thesis suggest that the gains from participating in a global economy are potentially large but depend in large part on the extent to which the benefits of technology are spread around the world, which in turn depends on geography and other country characteristics.