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Technological Leadership And Sustainable Growth In A Bilateral Trade Model

Author

Listed:
  • FRANCISCO CABO

    (Departamento Economía Aplicada, Universidad de Valladolid, Avda. Valle Esgueva, 6 Valladolid, 47011, Spain)

  • GUIOMAR MARTÍN-HERRÁN

    (Departamento Economía Aplicada, Universidad de Valladolid, Avda. Valle Esgueva, 6 Valladolid, 47011, Spain)

  • MARÍA PILAR MARTÍNEZ-GARCÍA

    (Departamento de Métodos Cuantitativos para la Economía, Universidad de Murcia, Campus del Espinardo Murcia, 30100, Spain)

Abstract

This paper develops a trade model for a technologically leading country and a developing country that exploits a renewable natural resource. Technology diffuses from the technological leader to the developing country through foreign direct investment (FDI). Alternatively, innovative activities can also be carried out in the developing economy. We prove the existence and uniqueness of an equilibrium path along which both countries grow at the same rate, maintaining the natural-resource stock at a constant level. The saddle-point property for this equilibrium is proved and a sensitivity analysis is carried out. The steady-state growth rate and consumption under both scenarios are compared and the effect of resource abundance analyzed.

Suggested Citation

  • Francisco Cabo & Guiomar Martín-Herrán & María Pilar Martínez-García, 2008. "Technological Leadership And Sustainable Growth In A Bilateral Trade Model," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 73-100.
    • Handle: RePEc:wsi:igtrxx:v:10:y:2008:i:01:n:s0219198908001789
    DOI: 10.1142/S0219198908001789
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    References listed on IDEAS

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    1. Edward K. Y. Chen, 1983. "Multinational Corporations, Technology and Employment," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-06106-8, December.
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    Cited by:

    1. F. Cabo & G. Martín-Herrán & M. Martínez-García, 2014. "Property rights for natural resources and sustainable growth in a two-country trade model," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 37(1), pages 99-123, April.

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    More about this item

    Keywords

    Trade; renewable natural resources; technological progress; foreign direct investment; endogenous growth; sustainability; Subject Classification: 91A23; Subject Classification: 91B76; Subject Classification: 91B60; Subject Classification: 91B62;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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