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Globalization, Factor Endowments and Scale-Invariant Growth

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  • Elias Dinopoulos
  • Constantinos Syropoulos

Abstract

The paper develops a two-country dynamic general-equilibrium model of growth without scale effects to explore the effects of globalization on long-run growth and wages. Higher quality products are endogenously discovered through stochastic and sequential global innovation contests in which challengers devote resources to R&D and technology leaders undertake rent-protection activities (RPAs) to prolong the expected duration of temporary monopoly power by frustrating the R&D effort of challengers. Globalization (i.e., a move from autarky to an integrated trading equilibrium) for two countries with identical relative factor abundance and possible differences in size does not affect the long-run growth rate of either country. However, the country that is abundant in the factor used intensively in the production of R&D services grows faster in autarky. Moreover, factor prices (adjusted for quality) and national long-run growth rates converge and are eventually equalized. Depending on international per-capita differences in factor abundance, the model also generates intra-sectoral trade, vertical and horizontal multinationals, and international outsourcing of services (R&D investment or RPAs). The growth effects of globalization between countries with different relative factor endowments are larger for smaller countries.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_009.

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Length: 47 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:deg:conpap:c009_009

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Related research

Keywords: Economic growth; scale effects; R&D; rent-protecting activities; innovation; wages.;

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References

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  1. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  2. Eaton, J. & Kortum, S., 1995. "Trade in Ideas: Patenting and Productivity onn the OECD," Papers 34, Boston University - Department of Economics.
  3. Samuel S. Kortum & Jonathan Eaton, 1995. "Engines of growth: domestic and foreign sources of innovation," Finance and Economics Discussion Series 95-35, Board of Governors of the Federal Reserve System (U.S.).
  4. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  5. Dinopoulos, Elias & Oehmke, James F. & Segerstrom, Paul S., 1993. "High-technology-industry trade and investment : The role of factor endowments," Journal of International Economics, Elsevier, vol. 34(1-2), pages 49-71, February.
  6. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May.
  7. Dinopoulos, Elias & Segerstrom, Paul, 1999. "The dynamic effects of contingent tariffs," Journal of International Economics, Elsevier, vol. 47(1), pages 191-222, February.
  8. Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, octubre-d.
    • Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, octubre-d.
  9. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  10. Keller, Wolfgang, 2002. "International Technology Diffusion," CEPR Discussion Papers 3133, C.E.P.R. Discussion Papers.
  11. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
  12. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  13. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Jonathan Eaton & Samuel Kortum, 1994. "International Patenting and Technology Diffusion," NBER Working Papers 4931, National Bureau of Economic Research, Inc.
  15. Dinopoulos, Elias & Thompson, Peter, 2000. "Endogenous growth in a cross-section of countries," Journal of International Economics, Elsevier, vol. 51(2), pages 335-362, August.
  16. Sener, Fuat, 2001. "Schumpeterian unemployment, trade and wages," Journal of International Economics, Elsevier, vol. 54(1), pages 119-148, June.
  17. Dinopoulos, Elias & Segerstrom, Paul, 1996. "A Schumpeterian Model of Protection and Relative Wages," Working Paper Series 471, Research Institute of Industrial Economics.
  18. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  19. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  20. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-66, April.
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  22. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  23. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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Cited by:
  1. Iordanis Petsas, 2010. "Sustained Comparative Advantage and Semi-Endogenous Growth," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 34-47, 02.

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