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Winners and losers from trade? Product and process innovation in a 3×3 model

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  • Tinnefeld, Franziska
  • Wagener, Florian

Abstract

We develop a multi-region, multi-sector Romer-type dynamic partial equilibrium model of endogenous growth. We calibrate on equally sized regions North, East, and South, based on data from Germany, Poland, and China. We compare the effect of trade block formation on innovation outcomes. Integration leads to aggregate increase in both product and process innovation, resulting in aggregate welfare gains. These are concentrated in North: the research sectors of East and South collapse. Our findings explain data from eastern European countries, as well as current R&D policies in China that are designed to avoid downstream lock-in.

Suggested Citation

  • Tinnefeld, Franziska & Wagener, Florian, 2026. "Winners and losers from trade? Product and process innovation in a 3×3 model," FEEM Working Papers 404836, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemwp:404836
    DOI: 10.22004/ag.econ.404836
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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