Endogenous International Technology Spillovers and Biased Technical Change in the GTAP Model

Abstract

This paper discusses the implementation of embodied international technology spillovers in the GTAP model. We specify a transmission mechanism for technical knowledge that assumes that knowledge is embodied in traded commodities. The usability of knowledge in the receiving country is dependent on the local absorption capacity (e.g., human capital, knowledge infrastructure) and on structural differences (e.g., factor endowments, climate) between countries. This concept is illustrated first by modeling spillovers embodied in final products and Hicks-neutral technical change. The bulk of the paper deals with factor-biased technical change in agriculture, and its international transmission through traded intermediate inputs. We demonstrate how to implement embodied international technology spillovers in the GTAP model and provide some numerical illustrations which highlight production effects and welfare effects. The GEMPACK implementation, together with additional data, is provided in a set of files which accompanies this paper.