Technology spillovers embodied in international trade: Intertemporal, regional and sectoral effects in a global CGE framework

- We model technology spillovers embodied in international trade flows.
- We highlight implications of accounting for indirect effects induced by spillovers.
- Trade-driven spillovers generate scale, technology, and composition effects.
- Trade-driven spillovers induce significant redistribution effects.
- The presence of spillovers affects BTAs' effectiveness and costs.

This paper uses a dynamic Computable General Equilibrium (CGE) model to assess the intertemporal and spatial dimension of technology spillovers embodied in international trade. Three are the main contributions of the study. First, link capital- and energy-productivity to machinery and equipment (M&E) imports using an empirical estimated relationship. Second, analyze the implications of specific spillovers embodied in trade of M&E. Third, analyze the interaction of climate and trade policies when accounting for indirect effects induced by spillovers. We find that explicitly modeling trade spillovers reveals significant effects thanks to the transmission mechanisms underlying imports of M&E. We then assess the net contribution of modeling trade spillovers within three policy scenarios. The aggregated net effects of spillovers are rather small confirming findings from previous studies. However, international and intersectoral redistribution effects can be significant.