ABSTRACT
This chapter focuses on the differential impact of human capital in facilitating trade-related North-South technology diffusion and then analyzes its implications on South-North brain drain in small and large states. It reviews large literature that estimate gains from trade. The chapter also focuses on the impact of education and whether it differs in small and in large states, and then analyzes the implications of brain drain on total factor productivity growth. It offers an empirical analysis of the relationship between North-South trade-related technology diffusion, education, country size and productivity growth in the South. The chapter examines how the impact on productivity growth of changes in such variables as the level of education, trade-related technology diffusion, and of a change in both variables, is affected by country size. It also examines whether the data contain unit root and whether NRD is endogeneous in order to choose a proper econometric model for the estimation.
