Endogenous growth and trade liberalization between asymmetric countries
The paper presents a general equilibrium model of endogenous growth and trade between two countries, an advanced country (A) and a backward country (B). The development stage is summarized by the level of knowledge stock accumulated through R&D investments. The latter generates technological progress that intermediate goods producing firms, operating under increasing returns to scale and monopolistic competition, perform to obtain process innovations (reduction of production costs) when they are incumbents, or product innovations if they are new entrants. The model shows that convergence in long-run growth rates can be obtained even in absence of international technology spillover, in which case, under the assumption of no variety overlap, the gain from trade will be only static. Dynamic effects will be delivered instead in presence of an initial overlap in the varieties produced in the two countries, together with a wide gap in unit production costs. In this case it is shown that the impact of trade liberalization on firms profits might generate a cumulative causation process which may lead to a polarization of innovative productions in the advanced country.
|Date of creation:||Jun 2007|
|Date of revision:|
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- Luis A. Rivera-Batiz & Paul M. Romer, 1990.
"Economic Integration and Endogenous Growth,"
NBER Working Papers
3528, National Bureau of Economic Research, Inc.
- van de Klundert, Theo & Smulders, Sjak, 1996.
"North-South knowledge spillovers and competition: convergence versus divergence,"
Journal of Development Economics,
Elsevier, vol. 50(2), pages 213-232, August.
- van de Klundert, T.C.M.J. & Smulders, J.A., 1994. "North-South knowledge spillovers and competition : Convergence versus divergence," Discussion Paper 1994-70, Tilburg University, Center for Economic Research.
- Smulders, Sjak & van de Klundert, Theo, 1995.
"Imperfect competition, concentration and growth with firm-specific R & D,"
European Economic Review,
Elsevier, vol. 39(1), pages 139-160, January.
- Smulders, J.A. & van de Klundert, T.C.M.J., 1995. "Imperfect competition, concentration and growth with firm-specific R&D," Other publications TiSEM 3287368d-bf5d-421a-91c1-e, Tilburg University, School of Economics and Management.
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