Trade and Uneven Growth

34 Pages Posted: 25 Aug 2000 Last revised: 16 Dec 2022

See all articles by Robert C. Feenstra

Robert C. Feenstra

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 1990

Abstract

We consider trade between two countries of unequal size, where the creation of new intermediate inputs occurs in both. We assume that the knowledge gained from R&D in one country does not spillover to the other. Under autarky, the larger country would have a higher rate of product creation. When trade occurs in the final goods, we find that the smaller country has its rate of product creation stowed, even in the long run. In contrast, the larger country enjoys a temporary increase in its rate of R&D. We also examine the welfare consequences of trade in the final goods, which depend on whether the intermediate inputs are traded or not.

Suggested Citation

Feenstra, Robert C., Trade and Uneven Growth (March 1990). NBER Working Paper No. w3276, Available at SSRN: https://ssrn.com/abstract=240078

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