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Technological Leadership And Sustainable Growth In A Bilateral Trade Model


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    (Departamento Economía Aplicada, Universidad de Valladolid, Avda. Valle Esgueva, 6 Valladolid, 47011, Spain)


    (Departamento Economía Aplicada, Universidad de Valladolid, Avda. Valle Esgueva, 6 Valladolid, 47011, Spain)


    (Departamento de Métodos Cuantitativos para la Economía, Universidad de Murcia, Campus del Espinardo Murcia, 30100, Spain)


This paper develops a trade model for a technologically leading country and a developing country that exploits a renewable natural resource. Technology diffuses from the technological leader to the developing country through foreign direct investment (FDI). Alternatively, innovative activities can also be carried out in the developing economy. We prove the existence and uniqueness of an equilibrium path along which both countries grow at the same rate, maintaining the natural-resource stock at a constant level. The saddle-point property for this equilibrium is proved and a sensitivity analysis is carried out. The steady-state growth rate and consumption under both scenarios are compared and the effect of resource abundance analyzed.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.

Volume (Year): 10 (2008)
Issue (Month): 01 ()
Pages: 73-100

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Handle: RePEc:wsi:igtrxx:v:10:y:2008:i:01:p:73-100

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Keywords: Trade; renewable natural resources; technological progress; foreign direct investment; endogenous growth; sustainability; Subject Classification: 91A23; Subject Classification: 91B76; Subject Classification: 91B60; Subject Classification: 91B62;

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