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Creative Destruction in International Trade

Author

Listed:
  • L. Dudley
  • J. Moenius

Abstract

Two different approaches have been proposed to explain the rise and decline of industries. Schumpeter (1942/1947) argued that creative destruction was a necessary part of innovation. Rybczynski (1955) demonstrated in a two-factor model that an increase in one factor leads to a decrease in output in the sector intensive in the other factor. Here we combine these approaches to show that under endogenous technological change, sectors threatened with decline may be given new life, while others lose their export markets as their products became noncompetitive. Testing this hypothesis with 1970-1992 export data from 14 OECD countries, we find evidence that induced innovation undertaken in response to local factor shortages may reshape international comparative advantage.

Suggested Citation

  • L. Dudley & J. Moenius, 2002. "Creative Destruction in International Trade," Papers on Economics and Evolution 2002-03, Philipps University Marburg, Department of Geography.
    • Handle: RePEc:esi:evopap:2002-03
    Note: The paper will be emailed on request. Please contact evopapers@econ.mpg.de
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    More about this item

    Keywords

    international trade; comparative advantage; induced innovation; technological change; dynamic;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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