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Trade and Uneven Growth

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  • Robert C. Feenstra

Abstract

We consider trade between two countries of unequal size, where the creation of new intermediate inputs occurs in both. We assume that the knowledge gained from R&D in one country does not spillover to the other. Under autarky, the larger country would have a higher rate of product creation. When trade occurs in the final goods, we find that the smaller country has its rate of product creation stowed, even in the long run. In contrast, the larger country enjoys a temporary increase in its rate of R&D. We also examine the welfare consequences of trade in the final goods, which depend on whether the intermediate inputs are traded or not.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3276.

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Date of creation: Mar 1990
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Publication status: published as Journal of Development Economics, Vol. 49, no. 1 (April 1996): 229-256.
Handle: RePEc:nbr:nberwo:3276

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