On the Role of Technical Cooperation in International Technology Transfers

We investigate whether and how technical cooperation aid (TC) facilitates technological diffusion from developed to developing countries, comparing it with foreign direct investment (FDI) and external openness. Extending the model of Benhabib and Spiegel (2005), we estimate the degree to which these three channels contribute to countries total factor productivity (TFP) growth rates. Our econometric model also allows us to identify whether a country will catch up to or diverge from the technological leader nation over time. Two sets of robust findings emerge. First, TC, FDI and openness all contribute to facilitate international technology transfers. Yet, among these three channels, openness seems to contribute the most, followed by TC. Also, TC seems to compensate for the lack of sufficient human capital in developing countries. Second, around 6 to 17 countries out of 85 in our sample fail to catch up to the technological leader over the 36 years. These results suggest that TC can play an important role in facilitating the technological catch up of developing countries.