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Knowledge goods, ordinary goods, and the effects of trade between leading and lagging regions

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  • Batabyal, Amitrajeet A.
  • Beladi, Hamid

Abstract

We study the effects of trade in knowledge and ordinary goods on the income and welfare gap between a leading and a lagging region. Knowledge goods are invented and produced in the leading region only. In contrast, ordinary goods can be produced in both regions. Our analysis sheds light on four salient questions. First, we determine the equilibrium wage ratio between the leading and the lagging regions. Second, we show that increasing the rate at which the lagging region copies the technology for producing knowledge goods narrows the income and welfare gap between the leading and the lagging regions. Third, we find the steady state level of welfare in the leading region. Finally, we note that an increase in the rate at which the lagging region copies the technology for producing knowledge goods may make the leading region worse off.

Suggested Citation

  • Batabyal, Amitrajeet A. & Beladi, Hamid, 2015. "Knowledge goods, ordinary goods, and the effects of trade between leading and lagging regions," Research Policy, Elsevier, vol. 44(8), pages 1537-1542.
    • Handle: RePEc:eee:respol:v:44:y:2015:i:8:p:1537-1542
    DOI: 10.1016/j.respol.2015.04.008
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    References listed on IDEAS

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    1. Amit Batabyal & Peter Nijkamp, 2014. "Technology, Learning, and Long Run Economic Growth in Leading and Lagging Regions," ERSA conference papers ersa14p893, European Regional Science Association.
    2. Peter Nijkamp, 2003. "Entrepreneurship in a Modern Network Economy," Regional Studies, Taylor & Francis Journals, vol. 37(4), pages 395-405.
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    5. Batabyal, Amitrajeet & Nijkamp, Peter, 2014. "Some properties of the technology gap between leading and lagging regions," MPRA Paper 71596, University Library of Munich, Germany.
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    1. Amitrajeet A. Batabyal & Peter Nijkamp, 2019. "The magnification of a lagging region’s initial economic disadvantages on the balanced growth path," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 719-730, October.
    2. Amitrajeet A. Batabyal & Peter Nijkamp, 2020. "Workplace choice, commuting costs, and wage taxation in urban and adjacent rural regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 65(3), pages 775-786, December.
    3. Oudom Hean, 2022. "The Effects of Technological Progress in Innovative Regions on the Labor Markets of Lagging Regions: A Theoretical Perspective," Economies, MDPI, vol. 10(8), pages 1-12, August.
    4. Amitrajeet A. Batabyal & Hamid Beladi, 2019. "Preference matching, income, and population distribution in urban and adjacent rural regions," Papers in Regional Science, Wiley Blackwell, vol. 98(5), pages 2201-2208, October.
    5. Amitrajeet A. Batabyal & Hamid Beladi, 2021. "Interregional demand for workers and the effects of labour income taxation," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(3), pages 1042-1050, June.

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    More about this item

    Keywords

    Interregional trade; Lagging region; Leading region; Technology; Welfare;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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