How does an idea invented in one country end up producing goods in another?
Knowledge Diffusion, Trade and Innovation across Countries and Sectors
Ana Maria Santacreu, Jie Cai, Nan Li (2021) · American Economic Journal: Macroeconomics 13(4)
Article ↗ · Replication data ↗ (openICPSR)
The archive requires an account we do not hold, so the files were not opened. What follows rests on the published abstract and on this platform's own observations.
What the authors found
Santacreu, Cai and Li model knowledge diffusion across countries and sectors, treating technology as something that spreads unevenly rather than as a national endowment. Trade and diffusion interact: a country's productivity in a sector depends on the ideas it can access, not only those it generates, and the pattern of diffusion shapes comparative advantage and the gains from openness.
What our data adds
Diffusion mostly leaves no trace in statistics, which is why the intellectual property lines in the balance of payments are worth more attention than they get. They are the part of knowledge transfer that someone paid for, denominated in money, with a direction. The United States receives 189.1 billion dollars a year, Japan 54.5, the United Kingdom 54.4 and Germany 50.2. On the paying side Luxembourg parts with 13.21 per cent of its GDP, Switzerland 3.66 and Singapore 3.43. Set against research spending, the contrast is instructive: Sweden spends 3.60 per cent of GDP on research and pays out 3.42 per cent for the use of other people's intellectual property.
What countries pay out for other people's ideas.
| Figure | Value | Indicator |
|---|---|---|
| United States, IP receipts | 189.1bn USD | BX.GSR.ROYL.CD |
| Luxembourg, IP payments as a share of GDP | 13.21% | BM.GSR.ROYL.CD |
| Sweden, IP payments | 3.42% of GDP | BM.GSR.ROYL.CD |
| Sweden, R&D spending for comparison | 3.60% of GDP | BX.GSR.ROYL.CD |
Every figure here is computed from observations in this database and can be charted, downloaded or queried.
What this cannot show
Priced technology transfer is a small and unrepresentative slice of diffusion. Most ideas spread through publication, imitation, people changing jobs and reverse engineering, none of which generates a payment or appears anywhere in these accounts. The royalty lines are also contaminated by intra-group transfers priced for tax, discussed at length in the profit-shifting notes, so a large payment may reflect a corporate structure rather than a technology.
The data behind it
Charges for the use of intellectual property, payments (BoP, current US$)
BM.GSR.ROYL.CD
WBCharges for the use of intellectual property, receipts (BoP, current US$)
BX.GSR.ROYL.CD