Knowledge Diffusion, Trade, and Innovation across Countries and Sectors
American Economic Journal: Macroeconomics
vol. 14,
no. 1, January 2022
(pp. 104-45)
Abstract
This paper provides a unified framework for quantifying the cross-country and cross-sector interactions among trade, innovation, and knowledge diffusion. This framework is used to study the effect of trade liberalization in an endogenous growth model in which comparative advantage and the stock of knowledge are determined by innovation and diffusion. The model is calibrated to match observed cross-country and cross-sector heterogeneity in production, innovation efficiency, and knowledge spillovers. The counterfactual analysis shows that a reduction in trade costs induces a reallocation of R&D and comparative advantage across sectors. Heterogeneous knowledge diffusion amplifies the specialization effects of trade-induced R&D reallocation, becoming an important source of welfare.Citation
Cai, Jie, Nan Li, and Ana Maria Santacreu. 2022. "Knowledge Diffusion, Trade, and Innovation across Countries and Sectors." American Economic Journal: Macroeconomics, 14 (1): 104-45. DOI: 10.1257/mac.20200084Additional Materials
JEL Classification
- F12 Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 Empirical Studies of Trade
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- O34 Intellectual Property and Intellectual Capital
- O41 One, Two, and Multisector Growth Models
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