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Explaining Japan's Innovation and Trade: A Model of Quality Competition and Dynamic Comparative Advantage

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  • Gene M. Grossman

    (Professor, Princeton University, Princeton, New Jersey, U.S.A.)

Abstract

In this paper, I develop a model of dynamic comparative advantage based on endogenous innovation. Firms devote resources to R&D in order to improve the quality of high-technology products. Research successes generate profit opportunities in the world market. The model predicts that a country such as Japan, with an abundance of skilled labor and scarcity of natural resources, will specialize relatively in industrial innovation and in the production of high-technology goods. I use the model to explore the effects of R&D subsidies, production subsidies and trade policies on the long-run rates of innovation in the two trade partner countries and on the long-run pattern of trade.

Suggested Citation

  • Gene M. Grossman, 1990. "Explaining Japan's Innovation and Trade: A Model of Quality Competition and Dynamic Comparative Advantage," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 8(2), pages 75-100, September.
    • Handle: RePEc:ime:imemes:v:8:y:1990:i:2:p:75-100
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    Citations

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    Cited by:

    1. Stadler, Manfred, 2015. "Innovation, industrial dynamics and economic growth," University of Tübingen Working Papers in Business and Economics 84, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    2. Thomas Sampson, 2023. "Technology Gaps, Trade, and Income," American Economic Review, American Economic Association, vol. 113(2), pages 472-513, February.
    3. Rolf Weder & Herbert Grubel, 1993. "The New Growth Theory and Coasean economics: Institutions to capture externalities," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 129(3), pages 488-513, September.
    4. Aggarwal, Aradhna, 2010. "Economic impacts of SEZs: Theoretical approaches and analysis of newly notified SEZs in India," MPRA Paper 20902, University Library of Munich, Germany.
    5. Lutz, Stefan, 2002. "Trade policy: 'Institutional' vs. 'economic' factors," ZEI Working Papers B 25-2002, University of Bonn, ZEI - Center for European Integration Studies.
    6. Stolpe, Michael, 1995. "Technology and the dynamics of specialization in open economies," Open Access Publications from Kiel Institute for the World Economy 738, Kiel Institute for the World Economy (IfW Kiel).
    7. Lutz, Stefan H., 2002. "Trade Policy: 'Political' vs. 'Economic' Factors," ZEW Discussion Papers 02-75, ZEW - Leibniz Centre for European Economic Research.
    8. Hegazy Elgazar, 2002. "Sources of Japanese competitiveness and growth," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(1), pages 65-78, February.
    9. Siebert, Horst, 1991. "A Schumpeterian model of growth in the world economy: some notes on a new paradigm in international economics," Open Access Publications from Kiel Institute for the World Economy 1498, Kiel Institute for the World Economy (IfW Kiel).
    10. Stolpe, Michael, 1993. "Industriepolitik aus Sicht der neuen Wachstumstheorie," Open Access Publications from Kiel Institute for the World Economy 1568, Kiel Institute for the World Economy (IfW Kiel).
    11. Galina Besstremyannaya & Richard Dasher & Sergei Golovan, 2019. "Growth through acquisition of innovations," Working Papers w0247, Center for Economic and Financial Research (CEFIR).
    12. Klaus Waelde, 1994. "Factor endowment, impatience and trade patterns in a small open economy of endogenous growth," International Trade 9403004, University Library of Munich, Germany, revised 06 Apr 1994.
    13. Klaus Waelde, 1994. "Trade pattern reversal: The role of technological change, factor accumulation and government intervention," International Trade 9403003, University Library of Munich, Germany, revised 06 Apr 1994.
    14. Klodt, Henning, 1992. "Theorie der strategischen Handelspolitik und neue Wachstumstheorie als Grundlage für eine Industrie- und Technologiepolitik?," Kiel Working Papers 533, Kiel Institute for the World Economy (IfW Kiel).

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