>And this undercuts their
>argument about a systematic underestimation of productivity.
Speaking of which....
"North-South Technological Diffusion: A New Case for Dynamic
Gains from Trade"
BY: MICHELLE P. CONNOLLY
Duke University
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Paper ID: Duke Economics Working Paper No. 99-08
Date: April 15, 1999
Contact: MICHELLE P. CONNOLLY
Email: Mailto:connolly at econ.duke.edu
Postal: Duke University
305 Social Sciences Building
Box 90097
Durham, NC 27708-0120 USA
Phone: (919)660-1819
Fax: (919)684-8974
Paper Requests:
Contact Anne Higgs Mailto:ah4 at mail.duke.edu phone: (919)
660-7752 fax: (919) 660-8038 Postal: Fuqua School of Business
Duke University Durham, NC 27708-0120
ABSTRACT:
The transitional dynamics for both a developed and a less
developed country are derived when North-South trade leads to
technological diffusion through reverse engineering of
intermediate goods in a quality ladder model of endogenous
growth. Domestic technological progress occurs via innovation or
imitation, while growth is driven by technological advances in
the quality of domestically available inputs, regardless of
country of origin. The concept of learning-to-learn is
incorporated into both imitative and innovative processes.
International trade with imitation leads to feedback effects
between Southern imitators and Northern innovators who compete
for the world market. Hence, both countries face transition
paths dependent on the relative technologies in the two
countries. For reasonable parameter values, the rates of
innovation and imitation are both falling in transition to
steady-state and yet remain above that under autarky. Increased
interaction between the North and the South, through increased
openness to imports of Northern intermediate goods, leads to
higher world growth, demonstrating dynamic benefits to the South
of increased trade with a more developed country. The transition
to steady-state in which the rate of innovation in the developed
country falls as the developing country reduces the technology
gap between the two countries may explain the apparent recent
slowdown of total factor productivity growth in OECD countries
over the last 30 years.