Hystersis In The Trade Pattern
We study a world economy comprising two countries that may differ only in their prior experience in the research lab. Entrepreneurs in each country develop new technologies for varieties of a differentiated product whenever expected profits justify up-front research costs. Research productivity depends upon national stocks of knowledge capital, which accumulate in proportion to local research activity. The countries produce and trade their unique varieties of the differentiated good, as well as a homogeneous, "traditional" product. In this context, we ask whether a country can overcome a late start in research to develop a comparative advantage in the high-technology sector. We also examine the welfare properties of the equilibrium trajectory and of policies that might be used to reverse a country's fate.
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|Date of creation:||1990|
|Date of revision:|
|Contact details of provider:|| Postal: Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.|
Web page: http://econ.tau.ac.il/foerder/about
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- Frank D. Graham, 1923. "Some Aspects of Protection Further Considered," The Quarterly Journal of Economics, Oxford University Press, vol. 37(2), pages 199-227.
- Feenstra, R.C., 1990.
"Trade And Uneven Growth,"
353, California Davis - Institute of Governmental Affairs.
- Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
- Helpman, Elhanan & Grossman, Gene M., 1989.
"Product Development and International Trade,"
3445094, Harvard University Department of Economics.
- Gene M. Grossman & Elhanan Helpman, 1988. "Product Development and International Trade," NBER Working Papers 2540, National Bureau of Economic Research, Inc.
- Grossman, G.M. & Helpman, E., 1988. "Product Development And International Trade," Papers 132, Princeton, Woodrow Wilson School - Public and International Affairs.
- Ronald Jones, 1970. "The Role of Technology in the Theory of International Trade," NBER Chapters, in: The Technology Factor in International Trade, pages 73-94 National Bureau of Economic Research, Inc.
- Ethier, Wilfred J, 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica, Econometric Society, vol. 50(5), pages 1243-68, September.
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