Do Capital Inflows Spur Technology Diffusion? Evidence from a New Technology Adoption Index

IMF Working Papers, March 1, 2024

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ETI constructed for 181 countries over the period 1970-2020.
ETI measures the technological intensity of imports by leveraging patent data from PATSTAT and product-level trade data from COMTRADE.
ETI described as a technology score used to assess technology diffusion across emerging economies and low-income countries.

Empirical approach: local projection difference-in-differences.
Identification leverages variations in statutory capital flow regulations and associated liberalization episodes.
Data sources: PATSTAT (patent data) and COMTRADE (product-level trade data).

Variations in statutory capital flow regulations increase technological intensity (ETI) by 7-9 percentage points over 5 to 10 years.
The ETI increase is accompanied by a 28-33 pp rise in the volume of gross capital inflows over the same horizon.
The rise in gross capital inflows is driven primarily by foreign direct investment, with a 21 pp increase.
A 9 to 12 percentage points shift is observed in the level of Real GDP per capita in PPP terms following the regulatory variations.

Subject: Balance of payments, Capital account, Capital account liberalization, Capital flows, Imports, International trade, Technology.
Keywords: Capital account, Capital account liberalization, Capital account openness., Capital flows, ETI indicator, Global, IMF working paper No. 2024/44, Imports, liberalization episode, natural logarithm, standard deviation, Technology diffusion, Technology measurement, technology score.