This paper surveys what is known about the extent of international technology diffusion and channels through which technology spreads. Productivity differences explain much of the variation in incomes across countries, and technology plays a key role in determining productivity. The pattern of worldwide technical change is determined largely by international technology diffusion because a few rich countries account for most of the world's creation of new technology. Cross-country income convergence turns on whether technology diffusion is global or local. There is no indication that international diffusion is inevitable or automatic, but rather, domestic technology investments are necessary. Better understanding of what determines the effectiveness of technology diffusion sheds light on the pace at which the world's technology frontier may expand.

Income convergence across countries turns on whether technological knowledge spillovers are global or local. I estimate the amount of spillovers from R&D expenditures on a geographic basis, using a new data set which encompasses most of the world's innovative activity between 1970 and 1995. I find that technology is to a substantial degree local, not global, as the benefits from spillovers are declining with distance. The distance at which the amount of spillovers is halved is about 1,200 kilometers. I also find that over time, technological knowledge has become considerably more global. Moreover, language skills are important for spillover diffusion.

Facing the same labour demand shock through imports from China, we show that men and women make different labour market and family adjustments that result in significant long-run gender inequality. The gender gap is driven by the female biological clock. Using population registers and matched employer-employee data from Denmark, we document that especially women in their late 30s, towards the end of their biological clock, decide to have a baby as the shock causes displacement. High-earning women in leadership positions and women who need to acquire new human capital are central because their new employment would require particularly high investments that are incompatible with having a newborn in the short time remaining on the biological clock. While children penalize women in the labour market, we show that due to the biological clock an otherwise gender-neutral shock leads to a gender gap in the labour market.

This paper estimates the effect of changing environmental standards on patterns of international investment. The analysis advances the existing literature in three ways. First, we avoid comparing different countries by examining foreign direct investment in the United States and differences in pollution abatement costs among U.S. states. Data on environmental costs in U.S. states are more comparable than those for different countries, and U.S. states are more similar in other difficult-to-measure dimensions. Second, we allow for differences in states' industrial compositions, an acknowledged problem for earlier studies. Third, we employ an 18-year panel of relative abatement costs, allowing us to control for unobserved state characteristics. We find robust evidence that abatement costs have had moderate deterrent effects on foreign investment.

We estimate international technology spillovers to U.S. manufacturing firms via imports and foreign direct investment (FDI) between 1987 and 1996. In contrast to earlier work, our results suggest that FDI leads to substantial productivity gains for domestic firms. The size of FDI spillovers is economically important, accounting for about 14% of productivity growth in U.S. firms between 1987 and 1996. FDI spillovers are particularly strong in high-tech sectors, whereas they are largely absent in low-tech sectors. Small firms with low productivity benefit more from FDI spillovers than larger productivity firms with more productivity do. The evidence for import spillovers is much weaker.

How large are spatial barriers to transferring knowledge? We analyze the international operations of multinational firms to answer this fundamental question. In our model firms can transfer bits of knowledge to their foreign affiliates in either embodied (traded intermediates) or disembodied form (direct communication). Knowledge transfer costs interact with the knowledge intensity of production to determine the geographic structure of multinationals' input sourcing as well as its competitiveness in foreign markets. The model shows how data on observable trade costs and features of multinationals'global operations reveal the size and nature of knowledge transfer costs. Our empirical analysis confirms the model's predictions using firm-level data, quantifies the aggregate implications of the model for the structure of multinationals' operations, and demonstrates that transfer costs shape the knowledge content of intra-firm trade flows.

Why did Western Europe industrialize first? An influential view holds that its exceptionally well-functioning markets supported with a certain set of institutions provided the incentives to make investments needed to industrialize. This paper examines this hypothesis by comparing the actual performance of markets in terms of market integration in Western Europe and China, two regions that were relatively advanced in the preindustrial period, but would start to industrialize about 150 years apart. We find that the performance of markets in China and Western Europe overall was comparable in the late eighteenth century. Market performance in England was higher than in the Yangzi Delta, and markets in England also performed better than those in continental Western Europe. This suggests strong market performance may be necessary, but it is not sufficient for industrialization. Rather than being a key condition for subsequent growth, improvements in market performance and growth occurred simultaneously.

We examine whether two important theories of trade, the Heckscher‐Ohlin theory and the increasing returns theory, can account for the empirical success of the so‐called gravity equation. Since versions of both theories can predict this equation, we tackle the model identification problem by conditioning bilateral trade relations on factor endowment differences and on the share of intraindustry trade. Only for large differences in factor endowments does the Heckscher‐Ohlin model predict perfect production specialization in different countries as well as the gravity equation, and trade is purely in goods produced with different factor intensities. Our empirical analysis yields three findings. First, the predictions of the perfect specialization versions of both theories are rejected by the data and so are unlikely explanations for the empirical success of the gravity equation. Second, a model of imperfect specialization that includes both increasing returns and factor endowments as sources of trade has a mixed performance: it correctly predicts production of more differentiated goods when the level of intraindustry trade is greater; however, the predicted link to factor proportions is tenuous. Third, the predictions of a model with imperfect specialization that relies solely on differences in factor endowments find support in the data. These results suggest that factor endowments and increasing returns explain different components of the international variation of production patterns and trade volumes.