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Quid Pro Quo: Technology Capital Transfers for Market Access in China

Staff Report 486 | Published February 13, 2015

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Quid Pro Quo: Technology Capital Transfers for Market Access in China

Abstract

By the 1970s, _quid pro quo_ policy, which requires multinational firms to transfer technology in return for market access, had become a common practice in many developing countries. While many countries have subsequently liberalized quid pro quo requirements, China continues to follow the policy. In this paper, we incorporate quid pro quo policy into a multicountry dynamic general equilibrium model, using microevidence from Chinese patents to motivate key assumptions about the terms of the technology transfer deals and macroevidence on China’s inward foreign direct investment (FDI) to estimate key model parameters. We then use the model to quantify the impact of China’s quid pro quo policy and show that it has had a significant impact on global innovation and welfare.


Published in: _Review of Economic Studies_ (2015, pp. 1-40) https://doi.org/10.1093/restud/rdv008. See related papers: [Staff Report 396: _Openness, Technology Capital, and Development_](https://doi.org/10.21034/sr.396) [Staff Report 406: _Technology Capital and the U.S. Current Account_](https://doi.org/10.21034/sr.406) [Staff Report 487: _Technical Appendix for Quid Pro Quo: Technology Capital Transfers for Market Access in China_](https://doi.org/10.21034/sr.487) [Staff Report 488: _Patent Data Appendix for Quid Pro Quo: Technology Capital Transfers for Market Access in China_](https://doi.org/10.21034/sr.488) [Additional Files](https://researchdatabase.minneapolisfed.org/downloads/0k225b05z?locale=en) [M-files and Ftools](https://researchdatabase.minneapolisfed.org/downloads/4x51hj04n?locale=en)