Trade Patterns, Technology Flows, and Productivity Growth.

This paper presents a model of international trade in differentiated intermediate goods. Because intermediates are invented through costly R&D investments, employing foreign intermediates implies sharing the return to R&D with the inventor country. I first derive a relation of how domestic productivity is related to foreign R&D investments. In the subsequent empirical analysis, industry level data for eight OECD countries between 1970-91 is used to estimate that relation.