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Trade Costs, Innovation, and Imitation

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Author Info

  • Kind, H.J.

Abstract

This 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 Info

Paper provided by Norwegian School of Economics and Business Administration- in its series Papers with number 31/98.

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Length: 33 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:norgee:31/98

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Postal: NORWEGIAN SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION, HELLEVEIEN 30, 5035 BERGEN SANDVIKEN NORWAY.
Phone: 5595 9000
Fax: 5595 9100
Email:
Web page: http://www.nhh.no/
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Related research

Keywords: GROWTH MODELS ; INNOVATIONS ; TRADE;

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