Comparative Advantage in Innovation and Production

Mariano Somale

American Economic Journal: Macroeconomics, 2021, vol. 13, issue 3, 357-96

Abstract: This paper develops a dynamic model of innovation and international trade in which agents can direct their research efforts to specific goods in the economy. Trade affects the direction of innovation through its impact on the expected market size for an invention, leading to a two-way relationship between trade and technology absent in standard quantitative Ricardian models. Following a theory-consistent strategy to estimate the extent of endogenous adjustments in technology, I find that they can account for about half of the observed variance in comparative advantage in production in a sample of 29 countries and 18 manufacturing industries. In addition, the model suggests that standard Ricardian models overestimate the reductions in real income from increases in trade costs and underestimate the rise in real income due to trade liberalizations.

JEL-codes: F11 F14 L60 O31 O32 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20180295 (application/pdf)
https://doi.org/10.3886/E118824V1 (text/html)
https://www.aeaweb.org/doi/10.1257/mac.20180295.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20180295.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:13:y:2021:i:3:p:357-96

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20180295

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().