General Purpose Technologies and their Implications for International Trade
General purpose technologies (GPTs) are drastic innovations, such as electrification, the transistor, and the Internet, that are characterized by the pervasiveness in use, innovational complementarities, and technological dynamism. The model develops a two-country (Home and Foreign) dynamic general equilibrium framework and incorporates general purpose technology diffusion within Home that exhibits endogenous Schumpeterian growth. The model studies the effects of the diffusion of the general purpose technology on the pattern of trade and Home’s relative wage. Based on specific assumptions, the adoption of a GPT by a particular industry generates an increase in the productivity of manufacturing workers at Home. By assumption, the diffusion of a GPT across industries is governed by S-curve dynamics, and the diffusion of the GPT within an industry at Home is considered exogenous. The model analyzes the long-run and transitional dynamic effects of a new GPT on the pattern of trade and relative wage between the two countries.
|Date of creation:||15 Mar 2009|
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