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Specialization Dynamics, Convergence, and Idea Flows

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  • Liuchun Deng

    () (John Hopkins University)

Abstract

This paper studies the dynamics of international trade from the perspective of knowledge spillover. Building into an idea-flow model the industry dimension, I integrate four channels of knowledge spillover: each firm could learn from domestic producers as well as foreign sellers, and learning is both intra- and inter-industry. The theoretical framework yields the law of motion of industry-level productivity across countries, capturing strong interdependence of evolution of comparative advantage. I calibrate the model to a large sample of countries. My quantitative results capture important patterns in the data: strong convergence in comparative advantage and substantial mobility in specialization. Based on the law of motion, my decomposition exercise suggests international and inter-industry channels play a major role in knowledge spillover. Various measures are proposed to identify the “key player”, that is, the country or country-industry pair that contributes most to global productivity growth, in the knowledge diffusion network. The calibrated model also suggests dynamic gains from trade are at least one-third of static gains from trade.

Suggested Citation

  • Liuchun Deng, 2016. "Specialization Dynamics, Convergence, and Idea Flows," SERIES 09-2016, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Nov 2016.
  • Handle: RePEc:bai:series:series_wp_09-2016
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    References listed on IDEAS

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    More about this item

    Keywords

    international trade; specialization dynamics; convergence; industrial productivity; comparative advantage; knowledge spillover; economic growth;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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