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Fast-growing developing countries have emerged as an important destination and source of trade, investments and technology. Furthermore, trade between developing countries has grown rapidly over the last decades, and is becoming more diversified, where exchange includes from primary commodities to manufactures and high-end services. The aim of the special issue is to look at these dynamics and how the leading developing countries have turn into growth engines and technology drivers. [ABSTRACT FROM AUTHOR]

Decomposing the GDP growth from 1981 to 2004, this paper finds that innovation capacity has contributed significantly to the economic growth of China and India, especially in the 1990 s. Outputs of the national innovation system, measured by patents and high-tech/service exports, demonstrate the considerable progress China and India have made in innovation capacity. The enhanced innovation capacity of China and India is primarily due to their heavy investment in the inputs of innovation system, i.e., R&D expenditure and R&D personnel, in recent decades. This paper emphasizes the role that the governments have played in promoting innovation capacity and their contribution to economic development. Both governments have transformed their national innovation systems through linking the science sector with the business sector, providing incentives for innovation activities, and balancing import of technology and indigenous R&D effort. Using case studies of domestic biotech firms in China and India, this paper also offers micro-level insights on innovation capacity and economic development: (1) innovation capacity has become essential for domestic firms’ market success and (2) global institutional factors and national government policies on innovation have considerable influence on the choice of innovation at the firm level, i.e., to conduct indigenous R&D or to import foreign technology. [ABSTRACT FROM AUTHOR]

Decomposing the GDP growth from 1981 to 2004, this paper finds that innovation capacity has contributed significantly to the economic growth of China and India, especially in the 1990 s. Outputs of the national innovation system, measured by patents and high-tech/service exports, demonstrate the considerable progress China and India have made in innovation capacity. The enhanced innovation capacity of China and India is primarily due to their heavy investment in the inputs of innovation system, i.e., R&D expenditure and R&D personnel, in recent decades. This paper emphasizes the role that the governments have played in promoting innovation capacity and their contribution to economic development. Both governments have transformed their national innovation systems through linking the science sector with the business sector, providing incentives for innovation activities, and balancing import of technology and indigenous R&D effort. Using case studies of domestic biotech firms in China and India, this paper also offers micro-level insights on innovation capacity and economic development: (1) innovation capacity has become essential for domestic firms' market success and (2) global institutional factors and national government policies on innovation have considerable influence on the choice of innovation at the firm level, i.e., to conduct indigenous R&D or to import foreign technology. [ABSTRACT FROM AUTHOR]

The paper analyses the patterns of export productivity and trade specialization profiles in Brazil, China, India and South Africa, and in other economic groupings and regions. Various measures of trade specialization and a time varying export productivity indicator are estimated using highly disaggregated export data. The findings reveal that there are important differences in the export productivity and specialisation patterns across countries and regions. Export productivity-and export sophistication-are in line to that of wealthier and more advance economies. The results further confirm the importance of not just the volume of exports, but the type of specialisation patterns. [ABSTRACT FROM AUTHOR]

In this paper we discuss relationship between export diversity and economic performance, focusing on Brazil, China, India and South Africa (BCIS). Using time data on exports over the period 1962-2000 and Applied General Equilibrium (AGE) models for each country, we note the similarities as well as differences in the patterns of diversification in these countries. We find evidence of a U-shape relationship between per capita income and export specialization in at least China and South Africa, and given that the results from Granger causality testing are inconclusive and not robust with regards to export diversification measures, some preliminary evidence from the results suggest that export diversification Granger causes GDP per capita in Brazil, China and South Africa, but not in India, where it is rather GDP per capita changes that are driving export diversification. From AGE modeling we find that South Africa differs from the other economies in that it is the only case where export diversification has an unambiguously positive impact on economic development while in contrast in Brazil, China and India, it is rather export specialization that is preferred. We show that the manner in which export diversification is obtained may be important: if it is obtained with less of a reduction in traditional exports, the impacts are better (less negative). [ABSTRACT FROM AUTHOR]

We compare economic efficiencies in Brazil, India, and China, where economic efficiency measures the gap between potential and actual output for a given input combination and technological factor. We use stochastic production frontier models to measure the contributions of factors of production and technology to growth and estimate non-positive error terms that capture production inefficiencies in each country. The results suggest that China and India had relatively inefficient production in the early 1980s but have since improved production efficiency substantially. In the same period, production efficiency in Brazil has lagged those of China and India. The gap between Brazil's production efficiency and those of its Asian peers has narrowed in recent years. However, production remains more efficient in China and India, supporting more rapid growth in these countries relative to Brazil. [ABSTRACT FROM AUTHOR]

Institutional regionalization has come very late to East Asia compared with Europe, but its pace has dramatically increased since the mid-1990s. Many agreements, including bilateral ones such as those signed between Japan and Singapore, or pluri-lateral ones such as those between ASEAN countries, cover an ever increasing number of countries of the East Asian region, including Japan, India, and China. We first analyze Asian integration as a de facto, spontaneous, development of trade. Trade specialization in Asia has often been described as guided by the different levels of development of the countries participating in the regional integration. It constitutes a vertical division of labor between poor countries exporting natural resources and/or labor-intensive products to developed countries exporting machinery, sophisticated parts and components, and high-tech products. This trade structure is radically different from the European horizontal division of labor (exchange of different varieties of similar goods). Then we look at the micro-economic level how Japanese firms tend to integrate Asia into their international network, with Japanese partners being used as relays for Japanese export of semi-manufactured products. Last we present a simulation with the MIRAGE model of a scenario of general regionalization in which all the regions of the world develop preferential treatment for neighboring countries. These agreements are limited to industrial products with particular attention to the automotive sector. The main results are that Asia is the main winner in such a scenario, and within Asia it is Japan and Korea that will be the main winners. In fact, because developing Asia is one of the most protected regions of the world, the impact of liberalization is also the highest. Second, Japan and Korea are best placed to profit from these regional agreements, because other developed countries are excluded from the market of developing Asia. They also have superiority in manufacturing goods whereas countries like China might have problems upscaling their industrial production. Nevertheless our model did not take into account the voluntary pace of development chosen by China and that she will use her powerful state system to avoid being locked into low-tech, low-value-added products. [ABSTRACT FROM AUTHOR]