Growth, Conventional Production and Tourism Specialisation: Technological Catching-up Versus Terms-of-Trade Effects

Simone Valente

No 2005.140, Working Papers from Fondazione Eni Enrico Mattei

Abstract: This paper extends the ’expanding-varieties’ growth model in a two-countries-two-goods setup, and describes the dynamics of growth rates and terms of trade when the industry-based economy is the innovation leader, while the tourism-based economy is the follower (i.e. increases the number of intermediate inputs by readapting innovations developed abroad). Two types of transitional dynamics may exist: technological catching-up and technological falling-behind. Contrary to the standard result, technological catching-up by the follower is associated with lower growth rates with respect to the leader, whereas terms-of-trade effects guarantee positive growth differentials for the tourism-based economy when the technological gap with the leader increases over time. The underlying principle of ’increased relative demand’ might explain the good economic performance observed in tourism-dependent economies.

Keywords: Endogenous growth; Two-country models; Technology diffusion; Trade specialization (search for similar items in EconPapers)
JEL-codes: F12 F43 O33 (search for similar items in EconPapers)
Date: 2005-10
New Economics Papers: this item is included in nep-tur
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Growth, Conventional Production and Tourism Specialisation: Technological Catching-up Versus Terms-of-Trade Effects (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2005.140

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