International knowledge spillover through trade: A time-varying spatial panel data approach

This paper empirically examines international knowledge spillover through bilateral trade. We extend the knowledge production function using a spatial autoregressive term and time-varying weights matrices, and we estimate this model using a sample of 30 countries over the period 1975-2010. We find that there is a positive spillover effect of innovation from one country to its trade partners through bilateral import flows. The spillover effect accounts for approximately 1.3%-3.6% of the total effect of R&D input on innovation output over time.