North-South Technology Diffusion, Regional Integration, and the Dynamics of the Natural Trading Partners Hypothesis

Based on static analysis, a number of studies argue that forming a RTA is more likely to raise welfare if member countries are "natural trading partners," while other studies claim the opposite. The paper considers the argument from a dynamic viewpoint by examining the impact of trade with Japan, North America and the European Union on technology diffusion and TFP in Korea, Mexico and Poland.