Creative Destruction in International Trade

Leonard Dudley and J. Moenius

Papers on Economics and Evolution from Philipps University Marburg, Department of Geography

Abstract: Two different approaches have been proposed to explain the rise and decline of industries. Schumpeter (1942/1947) argued that creative destruction was a necessary part of innovation. Rybczynski (1955) demonstrated in a two-factor model that an increase in one factor leads to a decrease in output in the sector intensive in the other factor. Here we combine these approaches to show that under endogenous technological change, sectors threatened with decline may be given new life, while others lose their export markets as their products became noncompetitive. Testing this hypothesis with 1970-1992 export data from 14 OECD countries, we find evidence that induced innovation undertaken in response to local factor shortages may reshape international comparative advantage.

Keywords: international trade; comparative advantage; induced innovation; technological change; dynamic (search for similar items in EconPapers)
JEL-codes: F1 O3 (search for similar items in EconPapers)
Date: 2002-06
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Persistent link: https://EconPapers.repec.org/RePEc:esi:evopap:2002-03

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