Technology Spillover Effect of Processing Trade

1. Technology Spillover Effect of Processing Trade ——Take Zhejiang Province as the Example Bao Wenjia 10425403

2. Introduction • As one of biggest traditional provinces in China，Zhejiang Province's export scale expands continually. This project makes an empirical analysis between technology improvement and improvement brought out by the processing trade in Zhejiang .

3. Calculate “technology improvement rate” • Use “technology improvement rate” to evaluate the growth rate of technology, denote A.

4. Data (1992-2008): Y: GDP of Zhejiang Province as its output data . K: Investment in fixed assets of Zhejiang Province as its capital investment . L: Economically active population in Zhejiang Province as the labor input . • All these data sources are in the "Zhejiang Statistical Yearbook" (1993-2009 years).

6. Calculate “processing trade technology improvement rate” • Use “processing trade technology improvement rate” to evaluate the enhance effect for a region’s industry from processing trade, denote J. • J =(total processing trade export /total processing trade import)-1

7. Data (1992-2008): Data from1992 to1999 is from the "Statistical Yearbook of Zhejiang" Data from 2000 to2004 is from the "Yearbook of Zhejiang Foreign Economic Cooperation“ Data from 2005 to2008 is from Zhejiang Foreign Trade and Economic Cooperation Department.

9. ADF unit root test • Use ADF test to test if the time-series data LnA, LnJ is stable or not.

10. Result show as follow: So we can use lnA and lnJ to run regression.

11. Cointegration test • As ADF result shows, we can use lnA and lnJ to run regression. Results as follow:

12. LnA=0.6365 + 0.014LnJ + (0.059) (0.016) • R^2= 0.6698，adjusted R^2 = 0.6477， DW= 0.8117 • ADF test result for residue as follow:

14. Granger test

15. According to the Granger result above, we can get that lnJ Granger cause lnA, but lnA dose not Granger cause lnJ , which means there is a technology spillover effects in Zhejiang.

16. Conclution • There’s there’s a relevance between Zhejiang's technology improvement rate and the processing trade technology advancement rate，simultaneously，the Granger causal relation examination's result indicates that the processing trade technology improvement is the reason of the Zhejiang technology improvement，but the regression equation also showed that this technical spillover effect is not remarkable, which is when lnJ increases 1%,the lnA increases only 0.14%.