Structural Change in Production and Trade

In theory, trade and foreign direct investment (FDI) have a positive impact on spillover of technology, demand for human capital and skilled worker wages, profits and total factor productivity. Conditions of increased competition at world scale affect both the production period and change and/or support factor intensities. Beside fast improvements in information technologies, FDI and trade relations play a fundamental role in this process. Free trade conditions and better investment climates contribute to improvements in skilled labor supply and its impact on economic fundamentals by affecting the product variety and quality through structural changes in factor endowments. The rise in skilled labor capacities in developing countries contributes especially to change the landscape of factor endowments. Within this context, production activities with new production models are segmented through more than one country. As a result, comparative advantages of advanced economies against emerging countries in high tech sectors have been easing in time. In this study, we research these developments via panel data regressions and cross table analysis. Developments in FDI and trade, in both total and high-technology goods, are examined for countries/regions including China, US, Japan and EU in the 2001-2009 period.