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Contagion through Interactive Production and Dynamic Effects of Trade

Xin Xie ()

International Economic Review, 1999, vol. 40, issue 1, 165-86

Abstract: This paper produces three main results in a two-country model where learning is generated through interactive production. First, it endogenizes the incidence of international spillovers and consequently, integrates the convergence and divergence literature of endogenous growth. Second, it qualifies the notion of "the advantage of backwardness" and shows that a large technology gap may reduce cross-country spillovers. Third, it points out that besides the already recognized "contagion effect," trade also promotes technological progress in the LDC through a "complementarity effect" that shifts the resources in the LDC toward the production of more sophisticated intermediate products. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1999
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International Economic Review is currently edited by Harold L. Cole

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