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

  • Petsas, Iordanis

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.

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File URL: http://mpra.ub.uni-muenchen.de/14300/1/MPRA_paper_14300.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14300.

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Date of creation: 01 Jan 2008
Date of revision: 30 Sep 2008
Handle: RePEc:pra:mprapa:14300
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  1. Grossman, G.M. & Helpman, E., 1989. "Quality Ladders And Product Cycles," Papers 152, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
  3. Elias Dinopoulos & Peter Thompson, 1996. "A Contribution to the Empirics of Endogenous Growth," Eastern Economic Journal, Eastern Economic Association, vol. 22(4), pages 389-400, Fall.
  4. Grossman, G.M. & Helpman, E., 1989. "Endogenous Prduct Cycles," Papers 144, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. Grossman, Gene M & Helpman, Elhanan, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 43-61, January.
  6. 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.
  7. Taylor, M. Scott, 1993. "'Quality ladders' and Ricardian trade," Journal of International Economics, Elsevier, vol. 34(3-4), pages 225-243, May.
  8. Paul Segerstrom & Elias Dinopoulos, 1999. "A Schumpeterian Model of Protection and Relative Wages," American Economic Review, American Economic Association, vol. 89(3), pages 450-472, June.
  9. Dinopoulos, Elias & Thompson, Peter, 1998. " Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
  10. Grossman, G.M. & Helpman, E., 1989. "Endogemour Product Cycles," Papers 10-89, Tel Aviv.
  11. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
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