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Criss-crossing globalization : uphill flows of skill-intensive goods and foreign direct investment
 
Author:Mattoo, Aaditya; Subramanian, Arvind; Collection Title:Policy Research working paper ; no. WPS 5047
Country:World; Date Stored:2009/09/10
Document Date:2009/09/01Document Type:Policy Research Working Paper
SubTopics:Economic Theory & Research; Emerging Markets; Debt Markets; Trade Policy; Investment and Investment ClimateLanguage:English
Major Sector:Industry and tradeRel. Proj ID:1W-Services Trade Research -- -- P110919;
Region:The World RegionReport Number:WPS5047
Sub Sectors:Other domestic and international tradeTF No/Name:TF091542-SERVICES TRADE RESEARCH
Volume No:1 of 1  

Summary: This paper documents an unusual and possibly significant phenomenon: the export of skills, embodied in goods, services or capital from poorer to richer countries. The authors first present a set of stylized facts. Then, using a measure that combines the sophistication of a country’s exports with the average income level of destination countries, they show that the performance of a number of developing countries - notably China, Mexico and South Africa - matches that of much more advanced countries - such as Japan, Spain and the United States. The authors create a new combined dataset on foreign direct investment (covering greenfield investment as well as mergers and acquisitions). The analysis shows that flows of foreign direct investment to developed countries from developing countries - like Brazil, India, Malaysia and South Africa - as a share of their GDP, are as large as flows from developed countries - like Japan, Korea and the United States. The authors suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, a measure of uphill flows of sophisticated goods is significantly associated with better growth performance. These results suggest the need for a deeper analysis of whether the benefits of development might derive not from deifying comparative advantage but from defying it.

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