Export-Led Takeo⁄In a Schumpeterian Economy

Abstract

This study develops an open-economy Schumpeterian growth model with endogenous takeo⁄ to explore the e⁄ects of exports on the transition of an economy from stagnation to innovation-driven growth. We nd that a higher export demand raises the level of employment, which causes a larger market size and an earlier takeo⁄ along with a higher transitional growth rate of domestic output per capita but has no e⁄ect on long-run economic growth. These theoretical results are consistent with empirical evidence that we document using cross-country panel data in which the positive e⁄ect of exports on economic growth becomes smaller, as countries become more developed, and eventually disappears. We also calibrate the model to data in China and nd that its export share increasing from 4.6% in 1978 to 36% in 2006 causes a rapid growth acceleration, but the fall in exports after 2007 causes a growth deceleration that continues until recent times.

Keywords: International Trade, innovation, endogenous takeoff