Domestic Innovation and International Technology Diffusion as Sources of Comparative Advantage

Productivity differences across countries determine patterns of international trade-hence, comparative advantage. We use a multi-industry model of international trade to estimate a measure of industry productivity. We then quantify the effect that domestic innovation and technology diffusion have in...

Full description

Saved in:
Bibliographic Details
Published in:Review - Federal Reserve Bank of St. Louis 2018-12, Vol.100 (4), p.317-335
Main Authors: Maria, Ana Santacreu, Zhu, Heting
Format: Article
Language:English
Subjects:
Adoption of innovations
Advantages
Analysis
Banks (Finance)
Comparative advantage
Comparative studies
Convergence
Diffusion
Economic aspects
Economic models
Endogenous
Federal Reserve banks
Forecasts and trends
Innovations
International trade
Methods
Production management
Productivity
Technology
Trade policy
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Productivity differences across countries determine patterns of international trade-hence, comparative advantage. We use a multi-industry model of international trade to estimate a measure of industry productivity. We then quantify the effect that domestic innovation and technology diffusion have in explaining differences in productivity across countries and industries. Consistent with standard growth theories, we find the following: (i) Higher-income countries benefit more from domestic innovation than lower-income countries, whereas lower-income countries benefit more from technology diffusion; and (ii) the speed of convergence is larger for those countries and industries that are farther away from the technology frontier. To the extent that productivity differences determine comparative advantage, our findings suggest that domestic innovation and technology diffusion are endogenous sources of comparative advantage.
ISSN:0014-9187
2163-4505
DOI:10.20955/r.2018.317-35