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Innovation, Knowledge Diffusion, and Globalization

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  • Nelson Lind
  • Natalia Ramondo

Abstract

We review a recent body of theoretical literature that links the creation and diffusion of knowledge and technology to openness. We analyze two channels through which the spread of new ideas occurs: international trade and the activity of multinational firms (multinational production). The unifying theme of our survey is methodological. We focus on quantitative general equilibrium models that treat productivities as Fréchet random variables—as in the model of trade in Eaton and Kortum (2002) (EK). We present models in the literature that extend the EK model of trade to innovation, diffusion, and multinational firms, and examine the implications for counterfactuals related to the gains from trade. We finalize with new directions for research.

Suggested Citation

  • Nelson Lind & Natalia Ramondo, 2018. "Innovation, Knowledge Diffusion, and Globalization," NBER Working Papers 25071, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25071
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    JEL classification:

    • F1 - International Economics - - Trade
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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