Innovation, growth, and dynamic gains from trade

How large are the welfare gains from trade? Would such gains be significantly amplified in the long run when productivity is endogenously enhanced? To address these questions, we focus on the dynamic effect of trade, in particular, how trade affects the incentives for technological advancement. We c...

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Main Authors: HSU, Wen-Tai, RIEZMAN, Raymond G., WANG, Ping
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Language:English
Published: Institutional Knowledge at Singapore Management University 2019
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Online Access:https://ink.library.smu.edu.sg/soe_research/2314
https://ink.library.smu.edu.sg/context/soe_research/article/3313/viewcontent/dynamic_trade_11_13_2019_complete.pdf
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spelling sg-smu-ink.soe_research-33132020-10-16T07:07:33Z Innovation, growth, and dynamic gains from trade HSU, Wen-Tai RIEZMAN, Raymond G. WANG, Ping How large are the welfare gains from trade? Would such gains be significantly amplified in the long run when productivity is endogenously enhanced? To address these questions, we focus on the dynamic effect of trade, in particular, how trade affects the incentives for technological advancement. We construct an innovation-based endogenous growth model of North-South trade. There are two types of innovation: one by the North to upgrade the general purpose technology (GPT) and another by all countries to advance entrepreneurial knowledge for developing differentiated products. We find sizable welfare gains from trade, about 5.3% when compared to autarky. The gains in our dynamic model are much higher than the static estimates where the effects of GPT-driven innovation are eliminated. The share of dynamic gains from trade is about 78% of the total gains in our benchmark economy – much higher than comparable figures identified in previous studies. Comparative statics indicate that GPT innovation efficacy, entrepreneurial talent distribution and trade elasticity are crucial for dynamic gains from trade. 2019-11-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soe_research/2314 https://ink.library.smu.edu.sg/context/soe_research/article/3313/viewcontent/dynamic_trade_11_13_2019_complete.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Economics eng Institutional Knowledge at Singapore Management University Growth and Development International Economics
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Growth and Development
International Economics
spellingShingle Growth and Development
International Economics
HSU, Wen-Tai
RIEZMAN, Raymond G.
WANG, Ping
Innovation, growth, and dynamic gains from trade
description How large are the welfare gains from trade? Would such gains be significantly amplified in the long run when productivity is endogenously enhanced? To address these questions, we focus on the dynamic effect of trade, in particular, how trade affects the incentives for technological advancement. We construct an innovation-based endogenous growth model of North-South trade. There are two types of innovation: one by the North to upgrade the general purpose technology (GPT) and another by all countries to advance entrepreneurial knowledge for developing differentiated products. We find sizable welfare gains from trade, about 5.3% when compared to autarky. The gains in our dynamic model are much higher than the static estimates where the effects of GPT-driven innovation are eliminated. The share of dynamic gains from trade is about 78% of the total gains in our benchmark economy – much higher than comparable figures identified in previous studies. Comparative statics indicate that GPT innovation efficacy, entrepreneurial talent distribution and trade elasticity are crucial for dynamic gains from trade.
format text
author HSU, Wen-Tai
RIEZMAN, Raymond G.
WANG, Ping
author_facet HSU, Wen-Tai
RIEZMAN, Raymond G.
WANG, Ping
author_sort HSU, Wen-Tai
title Innovation, growth, and dynamic gains from trade
title_short Innovation, growth, and dynamic gains from trade
title_full Innovation, growth, and dynamic gains from trade
title_fullStr Innovation, growth, and dynamic gains from trade
title_full_unstemmed Innovation, growth, and dynamic gains from trade
title_sort innovation, growth, and dynamic gains from trade
publisher Institutional Knowledge at Singapore Management University
publishDate 2019
url https://ink.library.smu.edu.sg/soe_research/2314
https://ink.library.smu.edu.sg/context/soe_research/article/3313/viewcontent/dynamic_trade_11_13_2019_complete.pdf
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