2 Theoretical Framework
3.3 E¤ects within income groups
The countries we have included in our equations are heterogeneous. This raises the question of di¤erent e¤ects of variables between di¤erent country groups on . In table 3 we have separated high-income countries with a dummy variable 11. The use
of the dummy variable is based on the interest to study the e¤ects on developed high- income economies and developing countries (low-income and middle-income economies) separately. In table 3 we have rst taken equations (3) and (4) from table 1 and table 2, and enlarged them to contain the dummy variables ( ).
The most interesting question from our point of view is how the e¤ects of foreign direct and indirect R&D service stocks change. As before, the indirect service R&D stocks seem to have no e¤ect on neither in developing or developed countries. Still there is again evidence that direct service spillovers a¤ect In all other equations (than equation (1)), service R&D spillovers have a signi cant e¤ect on even at the 1% level. In developed countries, there seems to be no signi cant additional e¤ect on through trade in services. Equation (4) implies that could have had even a negative e¤ect on high income economies. Still we conclude that this is probably due to the education factor that is eventually positive for the developed countries (but not signi cant at 5%).
All countries have gained from indirect goods spillovers from foreign goods R&D stocks, and there is no evidence that the spillover e¤ects would have been di¤erent for developed countries. Still comparing the rst and the latter two equations, there is a di¤erence in the e¤ects of direct foreign R&D ows. Our results indicate that developed countries would have gained from direct goods R&D stocks. Due to equation (2) giving resources to post secondary education in developing countries has diminished
11Considering all studied explaining variables in our previous equations, we have added dummy
variables, denoted This dummy variable is equal to 1 for the high-income economies, and equal to 0 for the remaining countries, considered as developing countries.
the possibilities to gain from spillovers through trade in services. Considering the domestic R&D stocks, we can conclude that domestic R&D investments have been more pro table for developed countries.
l n TF P [ i ] [ i i ] [ i i i ] [ i v ] l n R 0 , 0 61 0 ,0 6 1 0 , 06 0 , 0 5 8 ( 4 . 61 ) * * ( 4. 6 2 )* * ( 3 . 2 8) * * ( 3. 1 8 ) * * l n Rh i 0 , 1 05 0 ,1 0 4 0 , 1 3 4 0 , 1 2 5 ( 4 . 39 ) * * ( 4. 2 4 )* * ( 4 . 3 5) * * ( 3. 9 1 ) * * l n Gd 0 , 0 47 0 ,0 4 9 - 0 , 00 7 -0 , 0 0 6 ( 2 . 59 ) * * ( 2. 7 0 )* * ( - 0 . 3 1 ) ( - 0 .2 7 ) l n Gd h i 0 , 0 78 0 , 0 7 0 , 1 5 2 0 , 1 3 7 ( 1 . 9 8) * (1 . 6 9) ( 2 . 9 1) * * ( 2 . 56 ) * l n Sd 0 , 0 21 0 ,0 4 2 0 , 0 3 7 0 , 0 5 ( 1 .7 4 ) ( 2. 8 3 )* * ( 2 . 9 2) * * ( 2 . 54 ) * l n Sd h i 0 , 0 07 -0 , 0 28 - 0 , 04 7 -0 , 1 0 3 ( 0 .3 1 ) ( - 0. 6 4 ) ( - 1 . 5 5 ) ( 2 . 08 ) * l n ES d -0 , 3 29 -0 , 1 5 9 ( 2 .4 2 ) * ( - 0 .8 4 ) l n Es d h i 0 ,4 4 5 0 , 4 8 7 (1 . 4 1) (1 . 4 7 ) l n Gi 2 0 , 5 3 6 0 , 4 9 6 ( 3 . 9 6) * * ( 3. 4 4 ) * * l n Gi 2 h i - 0 , 07 6 -0 , 0 0 6 ( - 0 . 3 8 ) ( - 0 .0 3 ) l n Si 2 0 , 0 4 2 0 , 0 3 9 ( 0 . 7 ) (0 . 6 4 ) l n Si 2 h i - 0 , 11 8 -0 , 0 9 7 ( - 1 . 2 8 ) ( - 1 .0 3 ) C o ns t a nt 1 , 7 84 1 ,8 0 8 0 , 2 6 1 0 , 5 4 5 ( 7 . 41 ) * * ( 7. 3 5 )* * ( 0 . 42 ) (0 . 7 6 ) O b se r v at i o ns 5 5 0 55 0 4 5 0 4 50 N u mb e r o f co u n t ri e s 50 5 0 5 0 5 0 R - sq u a re d 0 ,2 6 0 , 2 7 0 , 29 0 , 2 9 R - sq u a re d ad j . 0 ,1 7 0 , 1 8 0 , 18 0 , 1 8 A b so l u te v al u e of t s t a t i s t i c s i n p a r en t h es e s * si g n if i c an t a t 5 % ; * * s i g n i f i c a nt a t 1 % N o t es : C o u n tr y a n d p e ri o d d u m m ies in c lu d e d i n t h e t ab le
Table 3: Spillover e¤ects in developed and developing countries
4 Conclusions
In this paper we have studied the spillover e¤ects through trade in services. This is done by following two approaches that are based on the original model by CH (1995). First we consider direct spillover e¤ects only and then also take into account the possibility of indirect spillover e¤ects. According to our knowledge, service ows have not been analyzed separately from goods in these kinds of models, but the data of bilateral service
ows allows us to do this. The critical assumption is that bilateral service shares have been close to the shares in 1997. The data consists of 50 countries from 3 income groups, and the observed years are 1990-2000.
Our results show that a 1% increase in the foreign service R&D stock has increased total factor productivity by 0,02%-0,05%12. The e¤ects on total factor productivities in
the developing countries have been at least as strong as in the developed world. We nd no signi cant evidence of di¤erent spillover gains through trade in services for coun- tries devoting resources into post-secondary education. Furthermore, indirect service spillovers have no signi cant e¤ect on TFP. Domestic R&D investments contribute to TFP. Especially in the developed countries the e¤ects are high, being over 0,16%. The evidence of the bene ts of direct spillovers through goods is complex. We can only conclude that developed countries have likely bene ted from direct spillovers through goods. The e¤ects of indirect spillovers through goods are high and signi cant for both developed and developing countries.
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