Hystersis in the Trade Pattern

Gene Grossman and Elhanan Helpman

No 275499, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: We study a world economy comprising two countries that may differ only in their prior experience in the research lab. Entrepreneurs in each country develop new technologies for varieties of a differentiated product whenever expected profits justify up-front research costs. Research productivity depends upon national stocks of knowledge capital, which accumulate in proportion to local research activity. The countries produce and trade their unique varieties of the differentiated good, as well as a homogeneous, "traditional" product. In this context, we ask whether a country can overcome a late start in research to develop a comparative advantage in the hightechnology sector. We also examine the welfare properties of the equilibrium trajectory and of policies that might be used to reverse a country's fate.

Keywords: Financial Economics; International Relations/Trade (search for similar items in EconPapers)
Pages: 41
Date: 1990-11
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Citations: View citations in EconPapers (2)

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https://ageconsearch.umn.edu/record/275499/files/TEL-AVIV-FSWP-169.pdf (application/pdf)

Related works:
Working Paper: Hysteresis In The Trade Pattern (1990)
Working Paper: HYSTERSIS IN THE TRADE PATTERN (1990)
Working Paper: Hysteresis in the Trade Pattern (1990)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275499

DOI: 10.22004/ag.econ.275499

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