Technological Leadership and Sustainable Growth in a Bilateral Trade Model

International Game Theory Review

Posted: 24 Apr 2010 Last revised: 25 Mar 2015

See all articles by Francisco Cabo

Francisco Cabo

IMUVa. Departamento Economía Aplicada, Universidad de Valladolid

Guiomar Martin-Herran

University of Valladolid - Faculty of Economic Science and Business Studies

Pilar Martínez-García

Universidad de Murcia

Date Written: March 1, 2008

Abstract

This paper develops a trade model for a technologically leading country and a developing country that exploits a renewable natural resource. Technology diffuses from the technological leader to the developing country through foreign direct investment (FDI). Alternatively, innovative activities can also be carried out in the developing economy. We prove the existence and uniqueness of an equilibrium path along which both countries grow at the same rate, maintaining the natural-resource stock at a constant level. The saddle-point property for this equilibrium is proved and a sensitivity analysis is carried out. The steady-state growth rate and consumption under both scenarios are compared and the effect of resource abundance analyzed.

Keywords: Trade, renewable natural resources, technological progress, foreign direct investment, endogenous growth, sustainability

Suggested Citation

Cabo, Francisco and Martin-Herran, Guiomar and Martínez-García, Pilar, Technological Leadership and Sustainable Growth in a Bilateral Trade Model (March 1, 2008). International Game Theory Review. Available at SSRN: https://ssrn.com/abstract=1496069

Francisco Cabo (Contact Author)

IMUVa. Departamento Economía Aplicada, Universidad de Valladolid ( email )

8 C/Plaza de Santa Cruz
Valladolid, Valladolid 47002
Spain

Guiomar Martin-Herran

University of Valladolid - Faculty of Economic Science and Business Studies ( email )

Avenida Valle Esgueva, 6
Valladolid
Spain

Pilar Martínez-García

Universidad de Murcia ( email )

Spain

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