Yes as a consequence of development.

Even if spurious, the link between imported inputs and growth in income per capita is present in research and data

From Bernard of Chartres and Newton to Myrdal , to Acemoglu and Rodrik, scientists and economists agree knowledge is cumulatively more efficient.    

Considering firms and workers learn-by-doing, integrating foreign inputs in exports improves worker productivity. When firms start turning diminishing returns into constant returns – that is when firms invest in capital and technology such that an extra machine or extra worker or an extra patent produce more than those existing machines, workers and patents – economies begin catching-up towards the frontier of knowledge.

Consider a developing country today and the mobile communication industry (it could be Kenya). When it began installing cell towers, the country imported existing technology from other countries and introduced its own services on the network. 

As the country’s citizens needed financial services, and an entrepreneur found that using the mobile  network was appropriate to distribute such services, the country innovated and moved closer (if not established) the technological frontier on the cellphone industry.

Acemoglu and Aghion find that firms and countries start by investing in machinery and hiring workers while focusing less on the quality of their staff or capital. 

Countries that are closer to the technology frontier, as the example country/industry above, focus more on innovation than in production (Romer’s scientist-worker model) – meaning less investment but more quality in investment. 

Convergence to the world frontier necessarily implies less investment and increased welfare, a description that corresponds to developed economies.

Such economies at the frontier increase the domestic value-added in exports that are adopted by countries further away from the frontier. 

Paradoxically, growth in GDP per capita in developed economies is negatively correlated with domestic value added between 1995 and 2014, as liberalisation increased foreign value added in exports.

This is particularly visible in the inversion from positive to negative correlation between foreign value added of exports and GDP per capita observed in Estonia and China in the years before and after WTO accession.

Conversely, foreign value added was negatively correlated with GDP per capita in Lithuania before the country acceded to the WTO and turned positive in the years after.


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