How technology spillovers from developed to developing countries influence labor productivity in developing countries

Abstract: Advanced technology plays a more and more important role in economic growth. With increasing international transactions, technology spillover between countries is becoming more important for especially developing countries. The main objective of this essay is to investigate the relationship between labor productivity and technological spillovers measured by Foreign Direct Investments (FDI), import and Research and Development expenditure (R&D). We use data covering 41 developing countries for the time period 2005 to 2008 to assess the extent to which technological spillovers from US influence labor productivity in the selected developing countries. Our results show that the relationship between technological spillovers and labor productivity in developing countries are highly sensitive to model specification and estimation techniques. Simple pooled data estimations revels a clear relation between technological spillover an labor productivity while more complex models such as  dynamic panel data models fails in this task.