Knowledge goods, ordinary goods, and the effects of trade between leading and lagging regions

Amitrajeet Batabyal and Hamid Beladi

Research Policy, 2015, vol. 44, issue 8, 1537-1542

Abstract: We study the effects of trade in knowledge and ordinary goods on the income and welfare gap between a leading and a lagging region. Knowledge goods are invented and produced in the leading region only. In contrast, ordinary goods can be produced in both regions. Our analysis sheds light on four salient questions. First, we determine the equilibrium wage ratio between the leading and the lagging regions. Second, we show that increasing the rate at which the lagging region copies the technology for producing knowledge goods narrows the income and welfare gap between the leading and the lagging regions. Third, we find the steady state level of welfare in the leading region. Finally, we note that an increase in the rate at which the lagging region copies the technology for producing knowledge goods may make the leading region worse off.

Keywords: Interregional trade; Lagging region; Leading region; Technology; Welfare (search for similar items in EconPapers)
JEL-codes: F12 R11 R13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:44:y:2015:i:8:p:1537-1542

DOI: 10.1016/j.respol.2015.04.008

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