Does Technology Spill Over across National Borders and Technology Regimes?

Abstract

This paper investigates whether technology spills over across national borders and technology regimes. We advocate a modeling strategy where changes in technical efficiency capture technology spillovers as industries absorb and implement the best-practice (frontier) technology. Recently developed dynamic panel-based techniques are used to determine whether efficiency series move together in the long run (cointegrate) and/or move closer together over time (converge). We contribute to the literature by controlling for technological heterogeneity and for cross-sectional dependence in the data. For a panel of manufacturing industries in six EU countries, we find evidence of long-run relationships among industries' efficiency levels in different countries and technology regimes. Furthermore, we find convergence among manufacturing industries, both across countries and across technology regimes.