Trade liberalization and technology diffusion: evidence from Mexico

Available from: 
October 2013
Paper author(s): 
Tracy Collins (New College of Florida)
Globalization and Trade

This paper examines how trade liberalization affects the diffusion of technology in disembodied form from a more developed country to a developing country. Using plant-level data from Mexico and data on input and output tariffs as well as license coverages, it is proven that once trade reform is initiated, home firms start to purchase less patents and licenses from foreign firms. The results demonstrate that the effect of trade liberalization on royalty payments differs from the typical results that trade liberalization has on technology adoption. A conclusion that is missed if royalty payments are included in a broad measure of technology adoption that includes both product and process R&D that is conducted within the firm. The results suggest that trade liberalization decreases royalty payments because firms switch from purchasing patents and licenses to directly purchasing the cheaper, technologically advanced capital goods.  


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Research section: 
Lacea 2013 annual meeting
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