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Trade And Growth In A Two-Country Model With Home Production And Uneven Technological Spillovers

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  • LUIGI BONATTI
  • GIULIA FELICE

Abstract

We develop a two-country growth model distinguishing between a market sector producing services that can also be home produced and a market sector producing goods without home-produced substitutes. The former is a technologically 'stagnant' sector, while the latter is subject to learning-by-doing and technological spillovers. This distinction coincides in the model with the distinction between the sector producing non-tradables and the sector producing internationally tradable goods. We study how differentials in labor tax rates across countries influence the mix of tradable and non-tradable goods that characterizes the market output of each country, thus affecting their bilateral trade balance and growth rates. Copyright � 2010 The Authors. Journal compilation � 2010 Blackwell Publishing Ltd and The University of Manchester.

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 78 (2010)
Issue (Month): 5 (09)
Pages: 484-509

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Handle: RePEc:bla:manchs:v:78:y:2010:i:5:p:484-509

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