This paper provides a trade-related formalization of the catch-up hypothesis and an empirical examination of the relationship between international trade and technological convergence among countries. In the model, trade is assumed to act as a conduit for knowledge spillovers among countries, while investment in education is needed for utilization of these spillovers. Trade-related dissemination of knowledge is shown to lead to convergence in technologies and incomes among the traders. The empirical implications of the hypothesis are examined in the second part of the paper. Countries that trade extensively with one another tend to exhibit a high incidence of significant convergence in technologies. Furthermore, it is shown that as the catch-up hypothesis suggests the size of the initial technological gap is related to the speed of the subsequent technological convergence that occurs among the heavy traders. |
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