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Diversification, innovation, and imitation inside the Global Technological Frontier

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  • Klinger, Bailey
  • Lederman, Daniel

Abstract

Recent research highlights the relationship between economic development and productive diversification, which may be hindered by market failures. After identifying stages of diversification in disaggregated export data, the authors develop a metric for the flows of export"discoveries,"or inside-the-frontier innovations in developing countries. They then explore the empirical relationship between economic development and (1) inside-the-frontier-innovation as reflected by the introduction of new export products, (2) export diversification measured by an index of export-revenue concentration, and (3) on-the-frontier innovation as reflected in patents. The data suggest, unsurprisingly, that inside-the-frontier innovation is more common among poor countries than among industrial economies. Overall export diversification increases at low levels of development but declines with development after a high-income point, whereas patenting activity rises exponentially with development. The data also suggest that the relationship between the frequency of export discoveries and economic development is not due to changes in the industrial composition of exports. The authors use a simple model of innovation and imitation to test the hypothesis that the threat of imitation inhibits the discovery of new exports. Econometric evidence suggests that the frequency of export discoveries across countries rises with the returns of export activities (proxied by exogenous export growth during the sample period), but the magnitude of this effect increases with barriers to entry. The count-data estimations deal with unobserved international heterogeneity, and the results are robust to various changes in the specification of the empirical model. This finding supports the hypothesisthat market failures inhibit inside-the-frontier innovation.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3872.

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Date of creation: 01 Apr 2006
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Handle: RePEc:wbk:wbrwps:3872

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Keywords: Economic Theory&Research; Markets and Market Access; Water Resources Assessment; Achieving Shared Growth; Airports and Air Services;

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References

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  1. Richard Blundell & Rachel Griffith & Frank Windmeijer, 1999. "Individual effects and dynamics in count data models," IFS Working Papers W99/03, Institute for Fiscal Studies.
  2. Ricardo Hausmann & Dani Rodrik, 2002. "Economic Development as Self-Discovery," NBER Working Papers 8952, National Bureau of Economic Research, Inc.
  3. Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," Working Paper Series rwp04-047, Harvard University, John F. Kennedy School of Government.
  4. Imbs, Jean & Wacziarg, Romain, 2000. "Stages of Diversification," CEPR Discussion Papers 2642, C.E.P.R. Discussion Papers.
  5. Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-69, May.
  6. Mattias Ganslandt & James R. Markusen, 2001. "Standards and Related Regulations in International Trade: A Modeling Approach," NBER Working Papers 8346, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Gregorio Giménez, 2011. "Imitations, economic activity and welfare," Documentos de Trabajo dt2011-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
  2. Dalila NICET- CHENAF (GREThA UMR CNRS 5113) & Eric ROUGIER (GREThA UMR CNRS 5113), 2008. "Recent exports matter: export discoveries, FDI and Growth, an empirical assessment for MENA countries," Cahiers du GREThA 2008-22, Groupe de Recherche en Economie Théorique et Appliquée.
  3. Dani Rodrik, 2008. "Second-Best Institutions," American Economic Review, American Economic Association, vol. 98(2), pages 100-104, May.
  4. Manuel Agosin & Claudio Bravo-Ortega, 2009. "Surgimiento de nuevas actividades de exportación en América Latina: el caso de Chile," Research Department Publications 3266, Inter-American Development Bank, Research Department.
  5. Haddad, Mona, 2007. "Trade integration in East Asia : the Role of China and production networks," Policy Research Working Paper Series 4160, The World Bank.
  6. Asier Minondo, 2011. "Does comparative advantage explain countries’ diversification level?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(3), pages 507-526, September.
  7. Klinger, Bailey & Lederman, Daniel, 2006. "Innovation and export portfolios," Policy Research Working Paper Series 3983, The World Bank.
  8. Diego Bastourre & Luis Casanova & Alejo Espora, 2011. "Tipo de Cambio Real y Crecimiento: Síntesis de la Evidencia y Agenda de Investigación," Department of Economics, Working Papers 082, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
  9. Hodler, Roland, 2006. "Industrial Policy in an Imperfect World," Proceedings of the German Development Economics Conference, Berlin 2006 13, Verein für Socialpolitik, Research Committee Development Economics.
  10. Lederman, Daniel, 2009. "The business of product innovation : international empirical evidence," Policy Research Working Paper Series 4840, The World Bank.
  11. Henrekson, Magnus & Stenkula, Mikael, 2009. "Entrepreneurship and Public Policy," Working Paper Series 804, Research Institute of Industrial Economics.
  12. David Moore & Athanasios Vamvakidis, 2007. "Economic Growth in Croatia," IMF Working Papers 07/198, International Monetary Fund.

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