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The role of trade in technology diffusion

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  • Andres Rodriguez-Clare

Abstract

This paper develops a two-country model in which trade is central to the process by which technology diffuses from the innovating country (North) to the backward country (South). Innovation in North leads to the introduction of higher-quality equipment goods that South can import only after some resources have been spent to adapt those equipment goods to the local conditions of South. Barriers to trade and policies that increase the cost of adapting equipment goods to the local environment decrease the rate of technology adoption, leading to a lower steady state relative income level in South. The model is calibrated to quantify this negative impact of barriers to trade and technology adoption on relative income levels and explore some additional implications of the model.

Suggested Citation

  • Andres Rodriguez-Clare, 1996. "The role of trade in technology diffusion," Discussion Paper / Institute for Empirical Macroeconomics 114, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmem:114
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    File URL: https://www.minneapolisfed.org/research/dp/dp114.pdf
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    References listed on IDEAS

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    Cited by:

    1. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    2. Hendricks, Lutz, 2000. "Equipment investment and growth in developing countries," Journal of Development Economics, Elsevier, vol. 61(2), pages 335-364, April.
    3. Egger, Peter H. & Loumeau, Gabriel & Loumeau, Nicole, 2023. "China's dazzling transport-infrastructure growth: Measurement and effects," Journal of International Economics, Elsevier, vol. 142(C).
    4. Nakajima, Tomoyuki, 2003. "Catch-up in turn in a multi-country international trade model with learning-by-doing and invention," Journal of Development Economics, Elsevier, vol. 72(1), pages 117-138, October.
    5. Tse, Chung Yi, 2000. "Monopoly, human capital accumulation and development," Journal of Development Economics, Elsevier, vol. 61(1), pages 137-174, February.
    6. Hussien, Abdurohman & Ahmed, Shakeel & Yousaf, Muhammed, 2012. "Does Trade Policy Explain Total Factor Productivity Differences Across Countries?," MPRA Paper 86594, University Library of Munich, Germany.
    7. Stephen L. Parente, 2000. "Learning-by-Using and the Switch to Better Machines," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 675-703, October.
    8. Boyan Jovanovic & Rafael Rob, 1997. "Solow vs. Solow: Machine Prices and Development," NBER Working Papers 5871, National Bureau of Economic Research, Inc.
    9. Shahid Yusuf, 2003. "Globalisation and the Challenge for Developing Countries," Journal of African Economies, Centre for the Study of African Economies, vol. 12(Supplemen), pages 35-72, February.
    10. Gabriel Sánchez, 1998. "Lobbying, innovation and protectionist cycles," Economics Working Papers 272, Department of Economics and Business, Universitat Pompeu Fabra.

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