National Concentration of High‐tech Products: The Second Great Divergence?

• Published date: 01 January 2023
• Author: Bing Lu,Jiandong Ju,Xinding Yu
• Date: 01 January 2023
• DOI: http://doi.org/10.1111/cwe.12460

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 88–118, Vol. 31, No. 1, 2023

88

*Bing Lu, Assistant Professor, School of Statistics, Beijing Normal University, China. Email: lubing@bnu.

edu.cn; Jiandong Ju, Professor, PBC School of Finance, Tsinghua University, China. Email: jujd@pbcsf.

tsinghua.edu.cn; Xinding Yu (corresponding author), Associate Professor, School of International Trade

and Economics, University of International Business and Economics, China. Email: yuxd@uibe.edu.cn.

The authors acknowledge financial support from the Center for International Finance and Economic

Research, Tsinghua University. Bing Lu acknowledges fi nancial support from the National Natural Science

Foundation of China (No. 72203023) and the Fundamental Research Funds for the Central Universities

(No. 2021NTSS12). Xinding Yu acknowledges financial support from the National Natural Science

Foundation of China (No. 72173021).

National Concentration of High-tech Products:

The Second Great Divergence?

Bing Lu, Jiandong Ju, Xinding Yu*

Abstract

Based on the product-country level trade data from 2004 to 2017, as well as the High-

Tech Products Catalog from the US Census Bureau, this paper examines empirically

the current phenomenon of “national concentration” in high-tech exports. The results

show that the phenomenon of “national concentration” not only exists but also tends

to be self-reinforcing. Compared with other products, the exports of high-tech products

tend to be concentrated in certain countries, and this concentration trends were further

strengthened after the global fi nancial crisis of 2008–2009. The national concentration

of R&D activities may be one of the important causes of the national concentration

of high-tech products. This pattern remains robust when we further use the value-

added export data and different definitions of high-tech products. We argue that the

phenomenon of “national concentration” of high-tech exports may herald the arrival of

the “Second Great Divergence” – the divergence between innovative and manufacturing

activities – in the global economy.

Keywords: high-tech products, national concentration, R&D, second great divergence

JEL codes: F02, F14, O33

I. Introduction

With the development of technology, innovation and high technology are gradually

becoming the core drivers of economic growth. Competition between countries is also more

focused on science and technology. On March 23, 2018, the US announced a 25 percent

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

National Concentration of High-tech Products 89

tariff on US$50 billion of Chinese goods, starting a trade confl ict between China and the

US. However, the trade confl ict is just the beginning of the friction between China and

the US, which has long gone beyond the trade sector and gradually expanded to other

areas such as fi nance and technology. The targeted sanctions of the US against Chinese

high-tech companies, such as Huawei, Da Jiang Innovations Science & Technology, and

Hikvision, refl ect US underlying intention to maintain its leading role in the high-tech

sector.

Intangible technology is difficult to measure. Meanwhile, international trade is

one of the most important vehicles of globalization, through which technology and

products fl ow globally. In international trade, high-tech products are important carriers

of technology. We therefore use the export of high-tech products to measure high-tech

exports. We match the product–country level export trade from 2004 to 2017 with the

catalog of high-tech products published by the US Census Bureau to identify high-

tech products. Data show that in recent years, high-tech product exports have become

increasingly concentrated in certain countries. The case study based on a lithography

machine, a typical high-tech product, also shows a self-reinforcing trend of concentration,

in line with the data pattern. To generally explore the national concentration of high-tech

products, this paper further conducts regression analysis. The empirical results show that

the export of high-tech products is more concentrated (in certain countries) than that of

other products, and this concentration trend is more pronounced after the fi nancial crisis.

The pattern of concentration of high-tech products is accompanied by a trend of national

concentration of research and development (R&D) activities. Considering that the total

export may include other countries’ value-added, we also test the above results using

value-added exports and obtain a robust conclusion.

This paper points out that the national concentration of high-tech products is

an important manifestation of the “Second Great Divergence.” The Second Great

Divergence is a concept that corresponds to the “First Great Divergence.” The fi rst great

industrial–agricultural divergence occurred in the 18th century, when the productivity of

developed Western countries, which were the fi rst to complete the Industrial Revolution,

increased, and the share of global manufacturing became increasingly concentrated

in these countries. The First Great Divergence led to the formation of a world where

the West was advanced, and the East was lagging. In recent years, the concentration

of high-tech product exports has taken on similar characteristics. We argue that this is

an important feature of the Second Great Divergence, the great divergence between

innovation and manufacturing activities.

Finally, we analyze the possible reasons for the emergence of the Second Great

Divergence. We argue that the new form of production in the new era of globalization