Comparative Advantage in Innovation and Production

Somale, Mariano

doi:10.17016/ifdp.2017.1206

Cited by 11 publications

(8 citation statements)

References 29 publications

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“…An alternative case is the one in which some of the externalities operate across industries. Yatsynovich (2014) has recently shown conditions under which a model with such cross-industry externalities exhibits a unique equilibrium for the case with frictionless trade.4 Abdel-Rahman and Fujita (1990),Allen et al (2015) andRedding (2016) explore similar isomorphisms for spatial equilibrium models in the economic geography literature.5Somale (2014) introduces sector-specific innovation into a multi-sectorEaton and Kortum (2002) model (via mechanisms fromEaton and Kortum, 2001) to quantify its implications for welfare. Interestingly, although the model inSomale (2014) is dynamic, the balanced growth path is also characterized by the same system of equations as all the models that we consider in this paper, and so our results extend to this case as well.…”

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confidence: 99%

Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale

Kucheryavyy

Lyn

Rodrı́guez-Clare

2016

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Although economists have long been interested in the implications of Marshallian externalities (i.e., industry-level external economies of scale) for trading economies, the large number of equilibria that they typically imply has kept such externalities out of the recent quantitative trade literature. This paper presents a multi-industry trade model with industry-level economies of scale that nests a Ricardian model with Marshallian externalities as well as multi-industry versions of Krugman (1980} andMelitz (2003). The behavior of the model depends on two industry-level elasticities: the trade elasticity and the scale elasticity. We show that there is a unique equilibrium if the product of the trade and scale elasticities is weakly lower than one in all industries. The welfare analysis reveals that if this condition is satisfied then all countries gain from trade, even when the scale elasticity varies across industries. The presence of scale economies tends to lower the gains from trade except if the country specializes in industries with relatively high scale elasticities. On the other hand, scale economies amplify the gains from trade liberalization except if it leads to reallocation towards industries with relatively low scale elasticities.

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confidence: 99%

Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale

Kucheryavyy

Lyn

Rodrı́guez-Clare

2016

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“…Our paper is related to two recent papers that feature multi-sector trade models of innovation with endogenous comparative advantage are Somale 2014 andSampson 2016. Somale 2014 studies a multisector semi-endogenous model of trade and innovation without knowledge spillovers.…”

Section: Introductionmentioning

confidence: 96%

Knowledge Diffusion, Trade and Innovation across Countries and Sectors

Cai¹,

Li²,

Santacreu³

2017

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We develop and quantify a multi-country and multi-sector endogenous growth model in which comparative advantage and the stock of knowledge are endogenously determined by innovation and knowledge diffusion. We quantify the effect of a trade liberalization on innovation, comparative advantage and welfare in a framework that features intersectoral production and knowledge linkages that are consistent with the data. A reduction in trade frictions induces a reallocation of innovation and comparative advantage across sectors: innovation reallocates towards sectors that experience larger increases in comparative advantage, and comparative advantage reallocates towards sectors with stronger knowledge spillovers.Furthermore, knowledge spillovers amplify the effect of a trade liberalization as countries and sectors benefit from foreign technology. In contrast to standard one sector models of trade and innovation without knowledge spillovers, we find significant dynamic gains from trade. These gains are mainly driven by innovation and knowledge diffusion across sectors and countries.

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“…Hence the interaction between trade and IPR has important implications for welfare and growth that need to be studied through the lens of quantitative dynamic models of trade and growth. Recent papers have also emphasized the importance of introducing dynamics in models of trade (see Perla, Tonetti, and Waugh, 2015;Buera and Oberfield, 2019;Cai, Li, and Santacreu, 2019;Somale, 2018). Other recent papers studying the interplay between openness and IP are Holmes, McGrattan, and Prescott (2015) who analyse the effect of quid-pro-quo practices in China on FDI and welfare, and Mandelman and Waddle (2019) who, in the context of the trade-war between US and China, evaluate the effect that retaliatory tariffs have to prevent weakening of IP protection.…”

Section: Introductionmentioning

confidence: 99%

Dynamic Gains from Trade Agreements with Intellectual Property Provisions

Santacreu¹

2021

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I study the short-and long-term effects of regional trade agreements (RTA) with strict intellectual property (IP) provisions. An empirical analysis using gravity methods suggests that regions signing these agreements share more technology in the form of technology licensing following the year of enforcement. I set up a multi-country model with endogenous productivity through innovation and adoption to quantify the effect of such agreements on innovation, growth and welfare. Adopters pay royalties to innovators for the use of their technology; the model allows for various degrees of IP rights enforcement ranging from pure imitation to perfect enforcement of IP rights. An improvement of IP protection in exchange for market access increases welfare, growth and innovation in the world. Developed countries benefit from a higher return to innovation and a lower home trade share, accruing welfare gains both in the short and long term. Developing countries are impacted through three channels: (i) internal IP reforms increase the return to domestic innovators,(ii) lower trade costs increase profits from exports, and (ii) higher royalty payments reduce the return to adopters. A counterfactual exercise shows that while the first two forces dominate in the long run, there are short-term losses from a lower return to adoption.

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Comparative Advantage in Innovation and Production

Cited by 11 publications

References 29 publications

Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale

Grounded by Gravity: A Well-Behaved Trade Model with Industry-Level Economies of Scale

Knowledge Diffusion, Trade and Innovation across Countries and Sectors

Dynamic Gains from Trade Agreements with Intellectual Property Provisions

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