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Knowledge Diffusion, Trade and Innovation across Countries and Sectors

Jie Cai (), Nan Li and Ana Maria Santacreu
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Nan Li: International Monetary Fund

No 2017-29, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We provide a unified framework for quantifying the cross country and cross-sector interactions among trade, innovation, and knowledge diffusion. We study the effect of trade liberalization in a multi-country, multi-sector endogenous growth model in which comparative advantage and the stock of knowledge are determined by innovation and diffusion. A reduction in trade costs induces a re-allocation of comparative advantage in production and innovation across sectors, which translates into higher growth along the counterfactual balanced growth path (BGP). Heterogeneous knowledge diffusion across country-sectors amplifies the specialization effects of trade-induced R&D re-allocation, becoming an additional source of growth and welfare.

Keywords: Knowledge spillovers; R&D; international trade; sectoral linkages (search for similar items in EconPapers)
JEL-codes: F12 O33 O41 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-gro, nep-ino, nep-int, nep-knm and nep-tid
Date: 2017-10-23, Revised 2019-04-07
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DOI: 10.20955/wp.2017.029

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Handle: RePEc:fip:fedlwp:2017-029