TECHNOLOGICAL LEADERSHIP AND SUSTAINABLE GROWTH IN A BILATERAL TRADE MODEL

Francisco Cabo, Guiomar Martin-Herran and María Pilar Martínez-García

International Game Theory Review (IGTR), 2008, vol. 10, issue 01, 73-100

Abstract: This paper develops a trade model for a technologically leading country and a developing country that exploits a renewable natural resource. Technology diffuses from the technological leader to the developing country through foreign direct investment (FDI). Alternatively, innovative activities can also be carried out in the developing economy. We prove the existence and uniqueness of an equilibrium path along which both countries grow at the same rate, maintaining the natural-resource stock at a constant level. The saddle-point property for this equilibrium is proved and a sensitivity analysis is carried out. The steady-state growth rate and consumption under both scenarios are compared and the effect of resource abundance analyzed.

Keywords: Trade; renewable natural resources; technological progress; foreign direct investment; endogenous growth; sustainability; Subject Classification: 91A23; Subject Classification: 91B76; Subject Classification: 91B60; Subject Classification: 91B62 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219198908001789

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