CAN TRADE REALLY HURT? AN EMPIRICAL FOLLOW-UP ON SAMUELSON'S CONTROVERSIAL PAPER

This paper investigates Samuelson's [Samuelson, P. A. “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization.” Journal of Economic Perspectives, 18(3), 2004, 135–46] argument that technical progress of the trade partner may hurt the home country. W...

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Bibliographic Details
Published in:Economic inquiry 2012-07, Vol.50 (3), p.724-738
Main Authors: BITZER, JÜRGEN, GÖRG, HOLGER, SCHRÖDER, PHILIPP J.H.
Format: Article
Language:English
Subjects:
Analysis
China
Econometrics
Economic models
Economists
Exports
Foreign direct investment
Foreign investment
Foreign investments
Globalization
Home country
Industrialized nations
International trade
Knowledge
Panel data
Protectionism
Samuelson, Paul A
Studies
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Summary:This paper investigates Samuelson's [Samuelson, P. A. “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization.” Journal of Economic Perspectives, 18(3), 2004, 135–46] argument that technical progress of the trade partner may hurt the home country. We illustrate this prospect in a simple Ricardian model for situations with outward knowledge spillovers. Within this framework Samuelson's Act II effects may occur. Based on industry level panel data for 17 OECD countries for the period 1973–2000 we show econometrically that the outflow of domestic knowledge via exports or foreign direct investment (FDI) to the rest of the world may have a negative impact on industry output in the home country. This is particularly so when exporting to technologically less advanced countries and, more specifically, China. (JEL F10, F11, F14, O30)
ISSN:0095-2583
1465-7295
DOI:10.1111/j.1465-7295.2010.00331.x