We develop a multi-country, dynamic general equilibrium model of product innovation and international trade to study the creation of comparative advantage through research and development and the evolution of world trade over tune. In our model, firms must incur resource costs to introduce new products and forward-looking potential producers conduct R&D and enter the product market whenever profit opportunities exist Trade has both intra- industry and inter-industry components, and the different incentives that face agents in different countries for investment and savings decisions give rise to Intertemporal trade. We derive results on the dynamics of trade patterns and trade volume, and on the temporal emergence of multinational corporations
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
2540.
Length: Date of creation: Oct 1990 Date of revision: Publication status: published as Journal of Political Economy, Vol. 97, No. 6, pp. 1261-1283, (December 1989). Handle: RePEc:nbr:nberwo:2540
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