Two different approaches have been proposed to explain the rise and decline of industries. Schumpeter (1942/1947) argued that creative destruction was a necessary part of innovation. Rybczynski (1955) demonstrated in a two-factor model that an increase in one factor leads to a decrease in output in the sector intensive in the other factor. Here we combine these approaches to show that under endogenous technological change, sectors threatened with decline may be given new life, while others lose their export markets as their products became noncompetitive. Testing this hypothesis with 1970-1992 export data from 14 OECD countries, we find evidence that induced innovation undertaken in response to local factor shortages may reshape international comparative advantage.
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Paper provided by Max Planck Institute of Economics, Evolutionary Economics Group in its series Papers on Economics and Evolution with number
2002-03.
Length: Date of creation: Jun 2002 Date of revision: Handle: RePEc:esi:evopap:2002-03
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Find related papers by JEL classification: F1 - International Economics - - Trade O3 - Economic Development, Technological Change, and Growth - - Technological Change
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