International trade and technical progress: the role of capital good imports in Portugal>

This paper develops an empirical analysis of the relationship between sectoral openness to capital good imports and technological sophistication. Input-output data from Portugal are used to demonstrate a strong relation between capital imports and sectoral technological levels as measured by vertically integrated labour coefficients. Both regression and non-parametric analyses are used. Such a relationship demonstrates the necessity of breaking out of the long-held focus on one-time exchange gains by trade theorists. It is argued that productivity gains from trade resulting from transfers of technology are primary gains of great importance and must be incorporated into theoretical work on trade. The paper also demonstrates a strong connection between a sector's capital imports and the technical training of the workforce of the sector. This suggests a relation between a sector's level of technology and its ability to make further advances through capital imports embodying advanced foreign technology. Sectors (countries) need technically trained workers in order to achieve a successful transfer. Interestingly, it is found that while Portugal clearly utilized trade with its more developed trading partners to augment its technology, this was not enough to avoid a technological divergence from its more developed neighbours. Several reasons for this are posited.