North-South Trade, Knowledge Spillovers and Growth

The endogenous growth literature has stimulated empirical research into links between trade and growth in general and international knowledge spillovers in particular. Results relating to the latter have been mixed and the issue of the appropriate construction of the spillover variable remains contentious. In this paper we develop measures taking account of whether knowledge is a public or private good in the donor and recipient countries, and include these in a dynamic panel model of growth. For a sample of five OECD donor countries and 52 developing recipient countries, we conclude that it matters little whether we treat knowledge as a private or public good in the donor but that spillovers, if they exist, act as a public good in the recipient. We also find that the level of trade is important in facilitating knowledge spillovers from donors to recipients.