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Trade and Uneven Growth

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Author Info
Robert C. Feenstra

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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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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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  1. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June. [Downloadable!] (restricted)
  2. Harry P. Bowen & Edward E. Leamer & Leo Sveikauskas, 1986. "Multicountry, Multifactor Tests of the Factor Abundance Theory," NBER Working Papers 1918, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Grossman, Gene M & Helpman, Elhanan, 1989. "Product Development and International Trade," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1261-83, December. [Downloadable!] (restricted)
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