published in: El Trimestre Economico, 2010, 302 (2)
This paper examines the impact on TFP of North-South trade-related technology diffusion in
Latin America and the Caribbean (LAC). North-South R&D flows are constructed based on
industry-specific R&D in the North, North-South trade patterns, and input-output relations in
the South. The main findings are: (i) Education and governance raise the level of TFP
directly; and (ii) education and governance also raise TFP through their interaction with
foreign R&D in R&D-intensive industries. These results imply a) that potential virtuous growth
cycles exist both in the level and in the growth of TFP, and b) that taking into account the
interaction effects between trade, education and governance by reforming the policies
simultaneously will have a greater impact on TFP.
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