Trade Costs, Innovation, and Imitation
AbstractThis paper presents an endogenous growth model where it is endogenously determined whether entrepreneurs in the poor East choose to innovate or to imitate goods from the rich West. It is shown that we have a unique equilibrium with imitation when trade is relatively expensive, in which case the global growth rate is higher and the international wage gap smaller than if both regions innovate. This changes fundamentally for some intermediate levels of trade costs, where there exist multiple equilibria - one equilibrium where both regions innovate, and one where the East imitates. Economic growth is moreover lower and international wage differences larger in the equilibrium with imitation.
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Bibliographic InfoPaper provided by Norwegian School of Economics and Business Administration- in its series Papers with number 31/98.
Length: 33 pages
Date of creation: 1998
Date of revision:
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Postal: NORWEGIAN SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION, HELLEVEIEN 30, 5035 BERGEN SANDVIKEN NORWAY.
Phone: 5595 9000
Fax: 5595 9100
Web page: http://www.nhh.no/
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GROWTH MODELS ; INNOVATIONS ; TRADE;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
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