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Product Development and International Trade

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  • Helpman, Elhanan
  • Grossman, Gene M.

Abstract

We develop a multicountry, dynamic general equilibrium model of product innovation and international trade to study the creation of comparative advantage through research and development and the evolution of world trade over time. In our model, firms must incur resource costs to introduce new products, and forward-looking potential producers conduct R & D and enter the product market whenever profit opportunities exist. Trade has both intraindustry and interindustry components, and the different incentives that face agents in different countries for investment and savings decisions give rise to intertemporal trade. We derive results on the dynamics of trade patterns and trade volume and on the temporal emergence of multinational corporations.

Suggested Citation

  • Helpman, Elhanan & Grossman, Gene M., 1989. "Product Development and International Trade," Scholarly Articles 3445094, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:3445094
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    References listed on IDEAS

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    1. Feenstra, Robert C & Judd, Kenneth L, 1982. "Tariffs, Technology Transfer, and Welfare," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1142-1165, December.
    2. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
    3. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    5. Dollar, David, 1986. "Technological Innovations, Capital Mobility, and the Product Cycle inNorth-South Trade," American Economic Review, American Economic Association, vol. 76(1), pages 177-190, March.
    6. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    7. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    8. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-585, May.
    9. Richard Jensen & Marie Thursby, 1987. "A Decision Theoretic Model of Innovation, Technology Transfer, and Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(4), pages 631-647.
    10. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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