International knowledge diffusion is considered an important source of productivity growth. However, direct observations on such diffusion have not been available at the macro level. We analyze novel data on international technology trade. Our empirical analyses indicate a positive association between payments for international technology adoption and the growth of labor productivity. Those payments appear to be a stronger contributor than research and development (R&D) investments for a large group of economies. For economies with high productivity, technology adoption payments tend to be complementary to R&D investments.
