The Determinants of High-Technology Exports: A Panel Data Analysis

Article excerpt

Introduction

Export promotion has occupied a central role in the economic growth strategies of many countries since the 1960s, as export growth has been associated with faster productivity and GDP growth (Bernard and Jensen 2004; Madsen 2009). The analysis of exports growth and its overall economic effects has also been a significant topic in the economic literature over the last decades. However, more recently, the focus has turned to high-technology trade, as researchers endeavor to understand the links among innovation, high-tech international trade and overall economic performance (Eaton and Kortum 2001; Spulber 2008; Zhang 2007; Falk 2009).

This growing interest is mostly due to the fact that international trade of hightechnology goods (1) provides information about the overall competitiveness and position of an economy within the technology global market. It also contributes to the understanding of how innovation affects comparative advantages on a dynamic economic environment and of the relative importance of high-technology on the international marketplace. For instance, Falk (2009) shows that the share of hightech exports significantly impacts GDP growth.

However, the literature on examining the determinants of high-tech exports is still thin. Zhang (2007), Srholec (2007), and Braunerhjelm and Thulin (2008) are among the few studies that empirically analyze the determinants of high-tech exports. Zhang (2007) finds that inflows of foreign direct investments and infrastructure are significant factors in explaining high-tech exports. However, Zhang (2007)'s empirical analysis is subject to major specification and endogeneity issues that usually plague OLS estimates. Srholec (2007) estimates a parsimonious model and shows that a country's technological capabilities--measured by enrollment in higher education, granted patents and access to computer--has a positive and significant impact on high-tech exports. He also shows that the size of the economy plays an important role in determining high-tech exports. Braunerhjelm and Thulin (2008) find that R&D investment is a key factor in determining high-tech exports across OECD countries, while market size does not exert any influence on high-tech trade.

The studies listed above shed light on important issues related to high-tech exports, but questions like the following are still open to debate: does openness impact high-tech exports? Is human capital a major source of comparative advantage in the global hightech market? Does capital abundance impact high-tech trade flows'? What is the role of institutions in explaining high-tech exports'? This paper aims to contribute to the understanding of these questions by developing a simple theoretical framework linking high-tech exports to its proximate determinants and by using panel data econometrics to identify the major factors influencing high-tech exports. Regression analysis is performed using a panel data set from 1980 to 2008 compiled using data from the World Bank World Development Indicators (WDI), Barro and Lee (2010), and Polity 1V Project.

The rest of the paper is organized as follows: Theoretical Framework presents a simple theoretical model linking high-tech exports to human capital, technology, and institutions. Empirical Model discusses the methodology, the data and the empirical model. Results reports the results of the empirical analysis, and Final Remarks summarizes the findings of the paper.

Theoretical Framework

The model below is motivated by a growing branch of theoretical research that considers the relationship between innovation and international trade. This paper follows Eaton and Kortum (2001) and assumes that the world economy is comprised of N countries and each country i produces a vector of high-tech goods j [member of] [0, 1] using human capital and technology given by h,(/). This implies that h(j) represents labor productivity or alternatively the quality of good j produced in country i. …