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Knowledge Diffusion and Trade across Countries and Sectors

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  • Nan Li

    (International Monetary Fund)

  • Jie Cai

    (Shanghai University of Finance and Economics)

  • Ana Maria Santacreu

    (St. Louis Fed)

Abstract

Countries and sectors interact through knowledge spillovers and international trade flows. These interactions drive differences in income per capita and innovation not only across countries, but also across sectors within a country. We develop and quantify a model of innovation, knowledge diffusion and trade that can explain these differences. Using data on intersectoral patent citations, R&D expenditures and international trade flows, we calibrate the model and perform several counterfactual exercises. Decreases in trade costs or increases in the speed of diffusion reallocate resources across countries and sectors, generating a distributional effect on aggregate innovation and growth.

Suggested Citation

  • Nan Li & Jie Cai & Ana Maria Santacreu, 2017. "Knowledge Diffusion and Trade across Countries and Sectors," 2017 Meeting Papers 692, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:692
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    References listed on IDEAS

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