Assessment and Dynamic Modeling of the Size of Technology Transfer

The size of technology imports and exports as well as the share of technology-based industries in the labor force are important means that can be utilized to assess the level of technology transfer in an economy. This paper reviews and discusses, within the United Arab Emirates (UAE) context, factors of technology transfer, exports and imports of technology products, outlining strengths and weaknesses. The annual size of imports, exports, and trade balance of technology products is further used to describe trend and make predictions and forecasts of the level of technology transfer. Using official trade data spanning the period from 1981 to 2013, the state-space methodology is utilized to handle the dynamic time series models and to study the developments of the state over time. Employing the Kalman filter, within the state-space framework, necessary estimation and forecasts are made. UAE strengths and weaknesses in terms of factors influencing technology transfer are discussed. Evidence suggests increasing domestic demand for technology products, insufficient domestic production, and increasing dependency on technology imports. Despite recent growth in UAE technology industries, the huge deficit in technology products trade balance indicates a negative trend in technology transfer. Policy implications are highlighted including the need for quality education, effective diffusion and internal transfer and generation of technology.