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Sustained Comparative Advantage in a Model of Schumpeterian Growth without Scale Effects

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  • Petsas, Iordanis

Abstract

This paper constructs a two-country (Home and Foreign) general equilibrium model of Schumpeterian growth without scale effects. The scale effects property is removed by introducing two distinct specifications in the knowledge production function: the permanent effect on growth (PEG) specification, which allows policy effects on long-run growth; and the temporary effects on growth (TEG) specification, which generates semi-endogenous long-run economic growth. In the present model, the direction of the effect of the size of innovations on the pattern of trade and Home’s relative wage depends on the way in which the scale effects property is removed. Under the PEG specification, changes in the size of innovations increase Home’s comparative advantage and its relative wage, while under the TEG specification, an increase in the size of innovations increases Home’s relative wage but with an ambiguous effect on its comparative advantage.

Suggested Citation

  • Petsas, Iordanis, 2008. "Sustained Comparative Advantage in a Model of Schumpeterian Growth without Scale Effects," MPRA Paper 14300, University Library of Munich, Germany, revised 30 Sep 2008.
    • Handle: RePEc:pra:mprapa:14300
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    References listed on IDEAS

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    1. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
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    Cited by:

    1. Iordanis Petsas, 2010. "Sustained Comparative Advantage and Semi‐Endogenous Growth," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 34-47, February.

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    More about this item

    Keywords

    Comparative advantage; Trade; Schumpeterian growth; Scale effects; R&D races;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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