Technological diffusion and productivity gains through foreign direct investment and trade

Abstract

Technological advancement is significant for an economy's growth. In recent times, economies focus on efficient and cost-effective production methods, which can only be achieved through the attainment of state-of-the-art technologies. A few countries develop these technologies, which are then disseminated to other countries through the process of technological diffusion. With rapid globalisation, the process of technological diffusion had received wide recognition in recent economic literature. The technology is diffused across countries through various channels, out of which trade and Foreign Direct Investment (FDI) are believed to be the most significant channels. This thesis aims to explore these technologies transfer channels translated into productivity growth of an economy. The thesis investigates the relationship between productivity and FDI in all the world economies, focusing on the economy of Pakistan and other South Asian countries. The study discusses in detail the economy of Pakistan in the past few decades and explores the total factor productivity (TFP) of Pakistan and its various macroeconomic determinants. Moreover, this thesis explores FDI trends and policies in major South Asian economies over the past few decades and empirically analyses the relationship between FDI and TFP in these countries. This thesis also aims to examine the importance of technological diffusion through FDI for both developing and developed economies. This study finds that developing and underdeveloped economies have minimal scope for technical innovations due to lack of resources; hence they mainly depend on technology transfer from developed countries for their technological advancement and productivity gains.

Date of Award	2021
Original language	English