Post-2015 Consensus: Science and Technology Perspective, Smith

Perspective Paper

Summary 

The technology transfer goals under consideration by the UN Open Working Group include general and technology-specific targets, as well as goals that are foundational to technology transfers that occur through trade and foreign direct investment.  The ultimate goal of these targets is to promote sustainable economic development.

Pamela J. Smith reviews the technology transfer proposals of Keith E. Maskus and then offers a broader perspective on policy options.

Maskus proposes two policies that have the potential for increasing technology transfers to developing countries.  The first is to increase the ratio of R&D spending as a percentage of GDP in developing countries.   Maskus calculates benefit-cost ratios for developing and emerging countries corresponding with a range of R&D spending scenarios.  He concludes that the proposed policies do not qualify as “strong or phenomenal” priorities for the UN agenda.  Smith agrees with this conclusion and that developing countries would benefit more from investing in policies that yield a higher benefit-cost ratio. 

The second policy is to establish “innovation zones.”   This would involve offering 10-year visas that permit free mobility of skilled labor among participants in the zones.   Maskus calculates benefit-cost ratios for countries that are the source and destination of migrating skilled labor within a North-South zone and South-South zone.  He concludes that the proposed policy qualifies as a “phenomenal” priority for the UN agenda.   Smith agrees that the technology transfers that would occur within an innovation zone are economically significant, but adds the caveat that benefits and costs vary considerably across source and destination countries of the migrants. 

In Smith’s assessment, the Maskus analysis is conservative so as not to overestimate the effects of the policies.  Smith also notes two intentional omissions.  The first is the omission of international spillovers in the analysis of the R&D spending policy.  The second is the omission of human capital spillovers in the analysis of innovation zones.  Smith discusses the implications of these omissions, yet concludes that these omissions do not change the basic conclusion regarding the economic significance of the policies and their priority in the UN agenda.

Smith offers broader perspectives from the literature on policy options that support economic development through technology transfers.  Smith begins by considering the channels for technology transfers including:  trade, foreign direct investment, licensing, and labor movements.  Second, Smith considers the developing country conditions that support technology transfers via these means.  The most basic of these conditions are the ability to absorb technologies and adapt them to meet domestic needs.  Third, Smith discusses the arguments for government intervention to support technology transfers. The basic argument is that the role of government is to create incentives for private actors to generate the socially optimal levels of technology transfers.  Fourth, Smith discusses appropriate policies to support technology transfers.  She highlights findings in the literature on “technology ladders” which suggest an evolution of conditions for technology transfers that roughly correspond with the level of development of countries.

Finally, Smith revisits the Maskus proposals from the broader literature perspective.   From this vantage point, she regards the R&D spending policy as a “national policy” that targets a basic condition in developing countries needed to absorb and adapt inward flows of technology—the local R&D infrastructure.  She concludes that this policy is likely to be most effective for middle-income developing countries that have an existing R&D sector and are at the duplicative imitation or creative imitation stages.  Alternatively, she regards the innovation zone policy as an “international policy” that supports the circulation of high-skilled labor and whose beneficiaries depend on the size of the zone and its participants.  She concludes that this policy is likely to be most effective for middle-income developing countries that would experience inflows of skilled labor, and for low-income developing countries that would receive remittances from labor that has out-migrated.   She views these two general policies as superior to technology-specific policies that would likely be less effective at supporting technology transfers and ultimately economic development.