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Trade, knowledge spillovers, and growth

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  • Grossman, Gene M.
  • Helpman, Elhanan

Abstract

In this paper, we examine one channel through which the trade regime might affect growth in the long run. We model endogenous technological progress that results from profit maximizing investments by far-sighted entrepreneurs. Productivity in the research lab depends upon the "stock of knowledge capital", a variable reflecting the state of scientific, engineering and industrial know-how in the local economy. We argue that local knowledge capital is likely to vary positively with the extent of contact between domestic agents and their counterparts in the international research and business communities, and that the number of such contacts increases with the level of commercial exchange. We derive the implications of this for the relationship between trade and growth.
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Suggested Citation

  • Grossman, Gene M. & Helpman, Elhanan, 1991. "Trade, knowledge spillovers, and growth," European Economic Review, Elsevier, vol. 35(2-3), pages 517-526, April.
    • Handle: RePEc:eee:eecrev:v:35:y:1991:i:2-3:p:517-526
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    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    2. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
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