Monday 18 August 2008

The benefits of openness and technology transfer

I ran two estimations at the weekend, augmenting a neoclassical growth model. The first estimation included openness (imports plus exports divided by GDP) as an explanatory variable, the second had electric meter imports as an explanatory variable. The dataset, preparation and variable manipulation were standard for growth empirics.

Openness was found to be associated with an average (over countries and years) growth increase of 0.35 percent per year, while electric meter imports were associated with a 0.1 percent increase. In the latter case, electric meter imports are acting as a proxy for a variety of influences on growth, not controlled by the classical variables of education and capital accumulation. In so far as electric meter imports capture the benefits of technology transfer more specifically than openness does, then the gap between the two numbers could very roughly measure the non-technology transfer benefits of openness, equalling 0.25 percent per year.

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