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Trade policies in many developing countries discriminate--through import bans, licensing requirements, or higher tariff rates. Even Australia adds a $12,000 tariff on used cars. Such discrimination is often motivated by the desire to protect domestic industries from competition from low-priced goods, to avoid becoming a dumping ground for castoffs from high-income countries,or to push domestic industries toward the technological frontier. But trade restrictions on used capital goods may be inappropriate in countries where low wages and high interest rates call for labor-intensive production processes. Older equipment is likely to be more labor-intensive than new equipment because technological changes tend to be labor-saving and older equipment requires greater maintenance and presents greater risk of machine downtime. In this empirical analysis of international trade in production machinery, the authors examine choices between new and used equipment, when there is labor-saving technical progress and the skills and technology available in a firm complement each other. They examine US exports of metalworking machine tools by country of destination, classifying machines by vintage technological characteristics. They do so by developing a new method for classifying trade data on machines according to the minimum technological skills necessary to operate them. They are consequently able to use trade data to measure technology transfer. The main findings: 1) The lower a country's level of development--as measured by such indicators as per capita income, wages, and average education--the greater the share of used equipment imported by the country. 2) Imports of used machinery are greater, the faster the technical change and the greater the skills required to run the machinery efficiently. They conclude that technological factors and skill constraints may be far more important than wage and interest-rate differentials in determining a firm's choice of technique in developing countries. Consequently the technological gap between advanced and developing economies rises when machines embody faster technological progress. The authors argue against constraints on imports of used equipment, not for the reason often given in existing literature--inappropriate capital-labor ratios in low-wage countries--but because investing in advanced technologies makes sense only if the countries importing them have the skill to use them.
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... For example, if it takes a year for capital to signi…cantly enter the used capital market, then di¤erential tari¤s on imports of new or old capital are equivalent to taxes that a¤ect capital di¤erently depending on its vintage. In practice, used machinery tends to experience higher trade barriers than new machinery, including outright prohibition, see the surveys by Soloaga et al (1999) ...
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... The flow of technological advancement with trade liberalisation is termed 'skillenhancing trade' (Robbins 2003;Barba-Navaretti, Solaga, and Takacs 1998). According to Robbins (2003), international trade increases capital flows and improves technology levels in the South and this situation stimulates the countries to quickly adopt high technology. ...
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... In more detail, trade and FDI can imply a substantial technological upgrading in opening DCs through different channels. On one hand, a developing country can implement ETC through the import of "mature" machineries (including second-hand capital goods, see Barba Navaretti, Solaga and Takacs [1923] 1998) from more industrialized countries. On the other hand, a lagged DC can enjoy the "last-comer" benefit of jumping directly on a relatively new technology (Perkins and Neumayer 2005). ...
... Globalization can imply a substantial technological up-grading in DCs through opening different channels. On the one hand, a developing country can implement embodied technological change (ETC) through the importation of ''mature'' machineries (including second-hand capital goods, see Barba Navaretti et al. 1998) from more industrialized countries. On the other hand, a late starter DC can enjoy the ''last comer'' benefit of jumping directly on a relatively new technology (Perkins and Neumayer 2005; Mitra and Jha 2015). 1 In addition to their direct effect through ETC, imports and FDI inflows may generate technological spillovers in favour of domestic firms which can absorb new imported technologies through labour mobility, input–output relationships and reverse engineering (see Coe and Helpman 1995; Coe et al. 1997). ...
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... In more detail, trade and FDI can imply a substantial technological upgrading in opening DCs through different channels. On one hand, a developing country can implement ETC through the import of "mature" machineries (including second-hand capital goods, see Barba Navaretti, Solaga and Takacs [1923] 1998) from more industrialized countries. On the other hand, a lagged DC can enjoy the "last-comer" benefit of jumping directly on a relatively new technology (Perkins and Neumayer 2005). ...
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... In more detail, trade and FDI can imply a substantial technological upgrading in opening DCs through different channels. On one hand, a developing country can implement ETC through the import of "mature" machineries (including second-hand capital goods, see Barba Navaretti, Solaga and Takacs [1923] 1998) from more industrialized countries. On the other hand, a lagged DC can enjoy the "last-comer" benefit of jumping directly on a relatively new technology (Perkins and Neumayer 2005). ...
... When the trading partners have different endowments of productive factors such as capital, labor or land this can also create a patterns of comparative advantage. In trade 9Navaretti et al (1998aNavaretti et al ( ,b, 2000) find that education levels are a significant factor in the importation of second-hand metal working machines from the US controlling for the wage level. They find a positive relationship between skill level and the technological advancement of the machine. ...
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