Technological diffusion and dynamic gains from trade
We consider a technologically backward country and analyse the implications on competitiveness and long-run growth of the quality content of traded goods. We build an endogenous growth model where quality improvements stem from research activity taking place in the R&D sector, and where the relative quality content of goods matter for export and import demand functions. We show that the possibility of an optimal growth with a balanced current account and no adverse terms-of-trade effects is closely related to the evolution of the country’s technological distance with respect to the trade partner: with an unfavourable quality-dynamics the country cannot engage successfully in “non-price” competition. Thus, long-run growth is coupled with an adverse export to import ratio, and a balanced trade requires a continuous offsetting fall in relative prices, either through devaluations or wage deflations. We then allow for international knowledge spillovers that increase the productivity of labour resources devoted to research in a way which is proportional to the technological distance between the countries. We show that the greater the country’s ability to absorb foreign knowledge and improve upon foreign technologies, the greater the gains in competitiveness, and the benefits to long-run growth. A numerical simulation confirms our findings.
|Date of creation:||Dec 2008|
|Publication status:||Published in Department of Public Economics Working Paper 117 (2009): pp. 1-20|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Keller, Wolfgang, 2000.
"Do Trade Patterns and Technology Flows Affect Productivity Growth?,"
World Bank Economic Review,
World Bank Group, vol. 14(1), pages 17-47, January.
- Keller, Wolfgang, 1997. "How trade patterns and technology flows affect productivity growth," Policy Research Working Paper Series 1831, The World Bank.
- Wolfgang Keller, 1999. "How Trade Patterns and Technology Flows Affect Productivity Growth," NBER Working Papers 6990, National Bureau of Economic Research, Inc.
- Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
- Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
- Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
- Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
- Anthony Philip Thirlwall, 1979. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
- Anthony Philip Thirlwall, 1979. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
- Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
- Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
- Sebastian Edwards, 1997. "Openness, Productivity and Growth: What Do We Really Know?," NBER Working Papers 5978, National Bureau of Economic Research, Inc.
- Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
- Sjak Smulders, 2004. "International capital market integration: Implications for convergence, growth, and welfare," International Economics and Economic Policy, Springer, vol. 1(2), pages 173-194, January.
- Smulders, J.A., 2004. "International capital market integration : Implications for convergence, growth and welfare," Other publications TiSEM f8e8e574-5d17-4d9f-9119-2, Tilburg University, School of Economics and Management.
- Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
- Paul Krugman, 1988. "Differences In Income Elasticities and Trends in Real Exchange Rates," NBER Working Papers 2761, National Bureau of Economic Research, Inc.
- Michelle P. Connolly & Diego Valderrama, 2005. "North-South technological diffusion and dynamic gains from trade," Working Paper Series 2004-24, Federal Reserve Bank of San Francisco.
- Eleonora Cavallaro & Marcella Mulino, 2008. "Vertical Innovation and Catching-Up: Implications of EU Integration for CEECs-5," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 14(3), pages 265-279, August.
- repec:kap:iaecre:v:14:y:2008:i:3:p:265-279 is not listed on IDEAS
- Miguel León-Ledesma, 2005. "Exports, Product Differentiation and Knowledge Spillovers," Open Economies Review, Springer, vol. 16(4), pages 363-379, October.
- Miguel Leon-Ledesma, 2002. "Exports, Product Differentiation and Knowledge Spillovers," Studies in Economics 0206, School of Economics, University of Kent.
- Robert A. Pollak, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Oxford University Press, vol. 38(4), pages 401-414.
- Eleonora Cavallaro & Marcella Mulino, 2007. "Vertical Innovation and Catching Up: Implications for Trade and Growth," Working Papers 75, Sapienza University of Rome, CIDEI.
- Valerio Crispolti & Daniela Marconi, 2005. "Technology transfer and economic growth in developing countries: an econometric analysis," Temi di discussione (Economic working papers) 564, Bank of Italy, Economic Research and International Relations Area.
- Pack, Howard & Westphal, Larry E., 1986. "Industrial strategy and technological change : Theory versus reality," Journal of Development Economics, Elsevier, vol. 22(1), pages 87-128, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:13793. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.