Regional Integration and Technology Diffusion: the case of Uruguay Preliminary Draft Adriana Peluffo* We examine the impact of trade related R&D spillovers from the country’s partners in the MERCOSUR as well as from the EU and NAFTA blocs and the rest of the world on total factor productivity (TFP) for the Uruguayan case at the industry level, for the period 1988-1995. Furthermore we analyse the impact of domestic R&D in Uruguay. There is evidence of trade related technology diffusion from MERCOSUR partners to Uruguay, while domestic R&D has a positive impact on productivity. Thus, policies aimed to promote domestic R&D and decreasing trade barriers could enhance Uruguayan manufacturing productivity. JEL Classification: F1, F2, O3 Keywords: trade, technology spillovers, technology transfer. *Instituto de Economía, Facultad de Ciencias Económicas, Universidad de la República, Uruguay E-mail: apeluffo@iecon.ccee.edu.uy, adriana.peluffo@gmail.com Acknowledgments We would especially like to thank German Calfat, Marcelo Olarreaga, Ruslan Lukach and Gabriela Fachola for their help, as well as to Maurice Schiff, Pedro Moncarz and to an anonymous referee for their comments. The usual disclaimer applies.