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Technological Leadership And Sustainable Growth In A Bilateral Trade Model

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  • FRANCISCO CABO

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

  • GUIOMAR MARTÍN-HERRÁN

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

  • MARÍA PILAR MARTÍNEZ-GARCÍA

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

Abstract

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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Bibliographic Info

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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Related research

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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