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Innovation, Diffusion, and Trade: Theory and Measurement

  • Ana Maria Santacreu

    (INSEAD and Hong Kong Institute for Monetary Research)

Growth and imports are correlated across countries, but the mechanisms underlying this relationship are not well understood. I develop a multi-country model in which imports and growth are endogenous variables connected by technological innovations and their international diffusion through trade. Fitting the model to data on innovation, productivity, and trade in varieties, I find that most of the growth-imports correlation is explained by these two mechanisms. I also find that the adoption channel has been particularly important in developing countries, accounting for about three-fourths of their growth. Finally, I run counterfactuals analysis, in which exogenous shocks such as a decrease in trade barriers or a decrease in adoption barriers induce a positive correlation between growth and import expansion.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 192012.

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Length: 49 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:hkm:wpaper:192012
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  1. László Halpern & Miklós Koren & Adam Szeidl, 2011. "Imported Inputs and Productivity," CeFiG Working Papers 8, Center for Firms in the Global Economy, revised 16 Sep 2011.
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  21. repec:fth:harver:1473 is not listed on IDEAS
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  30. Diego Comin & Mark Gertler & Ana Maria Santacreu, 2009. "Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations," Harvard Business School Working Papers 09-134, Harvard Business School.
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