Draft Comments Welcome NORTH-SOUTH AND SOUTH-SOUTH TRADE-RELATED R&D SPILLOVERS: AN INDUSTRY-LEVEL ANALYSIS* Maurice Schiff, Yanling Wang and Marcelo Olarreaga World Bank March 2002 Abstract This paper examines the impact on TFP of North-South and South-South trade- related R&D spillovers, as well as the impact of education and governance. It is the first, as far as we know, to do so at the industry level for developing countries. North-South and South-South R&D flows are constructed based on industry-specific R&D in the North, and trade patterns and input-output relations in the South. The main findings are: i) North-South and South-South R&D flows have a positive impact on TFP, though the former is larger; ii) R&D-intensive industries benefit mainly from North-South R&D flows while low R&D-intensity industries benefit mainly from South-South R&D flows, results that can be explained by a theory of dynamic comparative advantage; iii) education and (all measures of) governance have a positive and robust impact on TFP. Simulations are also performed where countries belonging to the same developing region are compared. * The opinions expressed in this paper are those of the authors and do not necessarily reflect those of the World Bank, its Board of Directors or the governments they represent.