External Sources of Clean Technology: Evidence from the Clean Development Mechanism∗

New technology is fundamental to sustainable development. However, inventors from industrialized countries often refuse technology transfer because they worry about reverse-engineering. When can clean technology transfer succeed? We develop a formal model of the political economy of North-South technology transfer. According to the model, technology transfer is possible if (i) the technology in focus has limited global commercial potential or (ii) the host developing country does not have the capacity to absorb new technologies for commercial use. If both conditions fail, inventors from industrialized countries worry about the adverse competitiveness effects of reverse-engineering, so technology transfer fails. Data analysis of technology transfer in 4,894 projects implemented under the Kyoto Protocol’s Clean Development Mechanism during the 2004-2010 period provides evidence in support of the model. ∗This paper was written during a research stay funded by an ERP fellowship of the Studienstiftung des deutschen Volkes. Patrick Bayer gratefully acknowledges this generous funding and is thankful for the hospitality of Columbia University. We thank Christopher Marcoux for help with data collection and management. We also thank Thomas Hale, Richard Perkins, Eri Saikawa, and two anonymous reviewers for helpful comments on a previous draft. †Corresponding author. Department of Political Science, University of Mannheim. D7, 27. 68131 Mannheim, Germany. Phone: +49-621-181-2418. Email: [email protected]