DP1359 Technological Convergence and International Trade

Author(s): Dan Ben-David
Publication Date: March 1996
Keyword(s): Income Convergence, International Trade, Technology, TFP
JEL(s): C22, O1, O5
Programme Areas: International Macroeconomics, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1359

This paper builds on earlier evidence showing that, while most countries exhibit little evidence of unconditional income convergence, countries that trade heavily with one another tend to exhibit a much higher incidence of convergence. Two alternative explanations for the trade-related convergence are explored here. The first alternative is that the trade-related income convergence is due to a convergence in capital-labour ratios. Little support is found for this explanation. The other alternative examined here is that of a trade-related convergence in technologies. This alternative is corroborated by a high incidence of convergence in total factor productivities among countries that trade heavily with one another ? an outcome that is not common between these same countries when they are grouped randomly rather than on the basis of trade.