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Technology Gap and International Trade: An Evolutionary Model

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  • Maggi, Giovanni

Abstract

We propose a model of the international technology gap that focuses on two sources of self-reinforcing mechanisms in the industrial competition: (i) a positive feedback that runs from innovations to profits to R&D expenditures, and (ii) learning effects in R&D and in production. We find that, if the cost of labor is lower in the late-starter country, several dynamic paths are possible, including one in which the late-starter catches up and then reverses the technology gap. When international diffusion of technology is introduced, the system has a bifurcation structure: if technology diffusion is relatively slow, there are two steady-state levels of the technology gap, one in favor of each country; if diffusion is fast, there is a unique stable equilibrium gap in favor of the country that has an exogenous ("Ricardian") cost advantage.

Suggested Citation

  • Maggi, Giovanni, 1993. "Technology Gap and International Trade: An Evolutionary Model," Journal of Evolutionary Economics, Springer, vol. 3(2), pages 109-126, May.
    • Handle: RePEc:spr:joevec:v:3:y:1993:i:2:p:109-26
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    Cited by:

    1. van de Klundert, Theo & Smulders, Sjak, 1999. "Catching-up and Regulation in a Two-Sector Small Open Economy," Review of International Economics, Wiley Blackwell, vol. 7(3), pages 431-454, August.
    2. Lena Gerdes & Bernhard Rengs & Manuel Scholz-Wäckerle, 2022. "Labor and environment in global value chains: an evolutionary policy study with a three-sector and two-region agent-based macroeconomic model," Journal of Evolutionary Economics, Springer, vol. 32(1), pages 123-173, January.
    3. van de Klundert, T.C.M.J. & Smulders, J.A., 1997. "Catching-up and Regulation in a Two-Sector Small Open Economy," Other publications TiSEM dcb72bbc-f57c-4bb3-8842-6, Tilburg University, School of Economics and Management.

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