The Cosine-Shaped Pattern of Innovations and Technological Advantages: Theory and Evidence

Jiandong Ju and Xuebing Yang

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2013, vol. 8, issue 4, 476-489

Abstract: Using data from 24 OECD countries, we find that the relationship between a country¡¯s R&D investment and technological advantage in a sector (measured by the country¡¯s labor productivity of the sector relative to the rest of the world) is non-monotonic. In particular, for countries whose technology levels are much lower or higher than the rest of the world in a sector, their sectoral R&D investment declines as their advantages in the sector improve; for counties with middle technology levels, the opposite is true. Extending the Eaton and Kortum framework, we develop a static model to theoretically analyze the relationship between R&D investment and technological advantages. We show that when the research efficiency in a sector is sufficiently elastic with respect to the sectoral technological advantage, a country¡¯s R&D investment increases with its technological advantage, and vice versa.

Keywords: R&D patterns; trade; technological advantage (search for similar items in EconPapers)
JEL-codes: F11 F14 O31 (search for similar items in EconPapers)
Date: 2013
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