International Students Bring Faster TFP Growth: an Extension to the Endogenous Growth Model

This paper is the final version of my homework of ECON 191 course in UCB. I spent one semester in this simple work. Although a little bit naive, the idea about growth is what I am interested in.

Abstract: Traditional endogenous growth models emphasize on the role of domestic R&D sectors, but do foreign technology absorption also contribute to domestic TFP growth? And which factors, such as international students, affect the foreign technology absorption? This paper addresses these questions through both theoretical framework and empirical analysis. We construct an extended endogenous growth model that incorporates foreign technology absorption and estimate the time series absorption rates for seven major countries from 2008 to 2017 using a rolling window approach. We then regress the estimated absorption rates on international student data and find that, for most countries, the students effect remains significant even after controlling for linear time trend. We further conduct a case study on China and show that there exists not only a significant linear time trend but also a strongly positive effect of returning international students, whereas imported books and copyrights imports are not statistically significant. Our study provides a useful paradigm for further empirical exploration of technology absorption and the causal identification of potential factors, laying foundation for future analyses.