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How does technology move between countries, and how does the flow of new technologies affect the flow of goods between those countries over time? Further, how much foreign technology is contained in the flow of goods across countries? Felix Tintelnot and Thomas Chaney gathered experts on modern trade to tackle those questions and others on trade flows in the modern global economy at what they hope will become a yearly gathering at the University of Chicago.
The conference, sponsored by the Becker Friedman Institute on April 3-4, honed in on a specific problem in the study of international economics: talking about the movement of goods and technologies in the same conversation. “Both channels are well-understood in theory, but there hasn’t been much measurement, particularly of the second kind of flows,” explains Tintelnot, an assistant professor of economics at the University of Chicago.
The newly emerging puzzle in the study of international trade dynamics is likely in your pocket right now: the iPhone. Apple designs the technology inside every new iPhone here in the US, then exports that technology to a chain of foreign suppliers that they tightly control. That chain of suppliers applies pieces of Apple’s intellectual capital to produce a good—your iDevice—which they then export back for purchase by US consumers. The flow of goods and technologies is tightly connected in that example, but Tintelnot argues that there’s much more to unpack and understand in complex arrangements like this.
For instance: Do Apple’s suppliers acquire technology that they can use to produce goods of their own design? Or are they dependent entirely on Apple and similar companies to provide technologies that maximize their output as producers of goods? How can the welfare implications of this mode of production be modeled to better understand how firms benefit from their partnership? In an economy where supply chain management can be a huge competitive benefit, how can researchers gain access to data that allows them to analyze and understand these trade flows?
These questions and more were considered by researchers presenting work at the conference. Sam Kortum examined how the labor market factors into complex import/export relationships that form as international trade deals take place between firms. Specifically, Kortum’s work—cited frequently by others at the conference—sought to calculate how much of the aggregate productivity of those firms came from labor. And relevant to the discussion of companies like Apple, Andy Bernard presented his work examining how one firm decides to buy from a supplier, and what consequences those buyer-supplier connections have for overall firm performance.
Other presentations at the conference ranged over many facets influencing trade, foreign investment, productivity, and impact on markets.
- Ezra Oberfield, presented a theory of innovation and diffusion of technologies to explore the role of international trade and foreign direct investment.
- Drawing on a new and unique collection of Mexican microdata, Ben Faber presented work in which he and his coauthors estimate the effect of foreign supermarket entry on household welfare and its underlying channels.
- Using new panel data across twelve European countries from 1996-2007, John Van Reenen presented work examining the impact of Chinese import competition on broad measures of technical change, including patenting, IT and TFP.
- Mitsuru Igami discussed a novel pattern of offshoring and market structure in a high-tech industry—the production of hard drive—and proposed a simple oligopoly model to explain it.
- Pol Antràs discussed research on how global sourcing decisions impact firm performance, employment, and welfare, and how shocks to one country affect firms’ sourcing from that country as well as domestic sourcing and sourcing from third markets.
- Kiminori Matsuyama proposed a two-country model of endogenous innovation cycles. His results suggest that adding endogenous sources of productivity fluctuations might help improve our understanding of why countries that trade more with each other have more synchronized business cycles.
Tintelnot noted that the approaches of the researchers gathered—including the application of novel data to tackle new questions—will be critical as he and his colleagues work to gauge the direction that scholarly examination of trade economics is headed. As more goods go digital, and more production is driven by technology, the interplay between theory and data will be critical to forming a full picture of how international trade shifts all of us in our connections to the larger global economy.