International Trade with Endogenous Technological Change

Abstract

To explain why trade restrictions sometimes speed up worldwide growth and sometimes slow it down, we exploit an analogy with the theory of consumer behavior. Substitution effects make demand curves slope down, but income effects can increase or decrease the slope, and can sometimes overwhelm the substitution effect. We decompose changes in the worldwide growth rate into two effects (integration and redundancy) that unambiguously slow down growth, and a third effect (allocation) that can either speed it up or slow it down. We study two types of trade restrictions to illustrate the use of this decomposition. The first is across the board restrictions on traded goods in an otherwise perfect market. The second is selective protection of knowledge-intensive goods in a world with imperfect intellectual property rights. In both examples, we show that for trade between similar regions such as Europe and North America, the first two effects dominate; starting from free trade, restrictions unambiguously reduce worldwide growth.

Innovation, diffusion, and trade: Theory and measurement

“…The lack of direct measures of adoption has led a third literature stream to use indirect ones, such as trade in intermediate goods (Rivera-Batiz and Romer, 1991;Kortum, 2001, 2002) or international patenting Kortum (1996, 1999). 8 Because this paper aims to understand the trade-growth connection, my paper uses trade as an indirect measure of diffusion.…”

Some implications of new growth theory for economic development

“…economy around the world. Therefore, the reduction of trade barriers has a positive impact in the growth rate of the world economy through the reduction of redundancy in research, which is the engine of growth in most of the new growth models (see Rivera-Batiz and Romer, 1991a). Nevertheless, the positive impact of the reduction of redundancy does not require trade.…”

The Role of International Trade in the Convergence of Per Capita GDP in the OECD: 1950–1985

“…Torden (1971) provides a comprehensive analysis of the effects of trade on the growth rate. For a recent theoretical work on the subject see Rivera-Batiz and Romer (1991). Downloaded by [Temple University Libraries] at 03:21 14 June 2016 among 19 OECD countries during the period 1950-1985.…”