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The Cosine-Shaped Pattern of Innovations and Technological Advantages: Theory and Evidence

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  • Jiandong Ju

    (Center for International Economic Research, School of Economics and Management, Tsinghua University, Beijing 100084, China; Department of Economics, University of Oklahoma, Norman, OK 73019, USA)

  • Xuebing Yang

    (Division of Business and Engineering, Pennsylvania State University at Altoona, Altoona, PA 16601, USA)

Abstract

Using data from 24 OECD countries, we find that the relationship between a country¡¯s R&D investment and technological advantage in a sector (measured by the country¡¯s labor productivity of the sector relative to the rest of the world) is non-monotonic. In particular, for countries whose technology levels are much lower or higher than the rest of the world in a sector, their sectoral R&D investment declines as their advantages in the sector improve; for counties with middle technology levels, the opposite is true. Extending the Eaton and Kortum framework, we develop a static model to theoretically analyze the relationship between R&D investment and technological advantages. We show that when the research efficiency in a sector is sufficiently elastic with respect to the sectoral technological advantage, a country¡¯s R&D investment increases with its technological advantage, and vice versa.

Suggested Citation

  • Jiandong Ju & Xuebing Yang, 2013. "The Cosine-Shaped Pattern of Innovations and Technological Advantages: Theory and Evidence," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(4), pages 476-489, December.
    • Handle: RePEc:fec:journl:v:8:y:2013:i:4:p:476-489
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-002-013-0024-8
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    Keywords

    R&D patterns; trade; technological advantage;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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