IMF Working Papers

Do Capital Inflows Spur Technology Diffusion? Evidence from a New Technology Adoption Index

By Gabriela Cugat, Andrea Manera

March 1, 2024

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Gabriela Cugat, and Andrea Manera. Do Capital Inflows Spur Technology Diffusion? Evidence from a New Technology Adoption Index, (USA: International Monetary Fund, 2024) accessed November 9, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We construct a novel measure of technology adoption, the Embodied Technology Imports Indicator (ETI), available for 181 countries over the period 1970-2020. The ETI measures the technological intensity of imports of each country by leveraging patent data from PATSTAT and product-level trade data from COMTRADE. We use this index to assess the link between capital flows and the diffusion of new technologies across emerging economies and low-income countries. Through a local projection difference-in-differences approach, we establish that variations in statutory capital flow regulations increase technological intensity by 7-9 percentage points over 5 to 10 years. This increase is accompanied by a significant 28-33 pp rise in the volume of gross capital inflows, driven primarily by foreign direct investment (21 pp increase), and a 9 to 12 percentage points shift in the level of Real GDP per capita in PPP terms.

Subject: Balance of payments, Capital account, Capital account liberalization, Capital flows, Imports, International trade, Technology

Keywords: Capital account, Capital account liberalization, Capital account openness., Capital flows, ETI indicator, Global, IMF working paper No. 2024/44, Imports, Liberalization episode, Natural logarithm, Standard deviation, Technology diffusion, Technology measurement, Technology score

Publication Details

  • Pages:

    49

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2024/044

  • Stock No:

    WPIEA2024044

  • ISBN:

    9798400269509

  • ISSN:

    1018-5941

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