Criss-Crossing Globalization: Uphill Flows of Skill-Intensive Goods and Foreign Direct Investment

This paper documents an unusual and possibly significant phenomenon: the export of skills, embodied in goods, services or capital from poorer to richer countries. A set of stylized facts is presented. Using a measure which combines the sophistication of a country’s exports with the average income level of destination countries, it is shown that the performance of a number of developing countries, notably China, Mexico and South Africa, matches that of much more advanced countries, such as Japan, Spain and USA. Creating a new combined dataset on FDI (covering greenfield investment as well as mergers and acquisitions) it is shown that flows of FDI to OECD countries from developing countries like Brazil, India, Malaysia and South Africa as a share of their GDP, are as large as flows from countries like Japan, Korea and the US. Then, taking the work of Hausmann et al. (2007) as a point of departure, it is suggested that it is not just the composition of exports but their destination that matters.