General Purpose Technologies and their Implications for International Trade

Petsas, Iordanis (2009): General Purpose Technologies and their Implications for International Trade.

Abstract

General purpose technologies (GPTs) are drastic innovations, such as electrification, the transistor, and the Internet, that are characterized by the pervasiveness in use, innovational complementarities, and technological dynamism. The model develops a two-country (Home and Foreign) dynamic general equilibrium framework and incorporates general purpose technology diffusion within Home that exhibits endogenous Schumpeterian growth. The model studies the effects of the diffusion of the general purpose technology on the pattern of trade and Home’s relative wage. Based on specific assumptions, the adoption of a GPT by a particular industry generates an increase in the productivity of manufacturing workers at Home. By assumption, the diffusion of a GPT across industries is governed by S-curve dynamics, and the diffusion of the GPT within an industry at Home is considered exogenous. The model analyzes the long-run and transitional dynamic effects of a new GPT on the pattern of trade and relative wage between the two countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: General purpose technologies, Schumpeterian growth, comparative advantage, scale effects, R&D races
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; F - International Economics > F1 - Trade > F10 - General; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance

References

AGHION, P. and HOWITT P. (1998a) Endogenous Growth Theory (Cambridge: MIT Press).

ARROYO, C., DINOPOULOS, E., and DONALD, S. (1995), “Schumpeterian Growth and Capital Accumulation: Theory and Evidence” (Manuscript, University of Florida).

BARRO, R. and SALA-I-MARTIN, X. (1995) Economic Growth (New York: McGraw-Hill).

DINOPOULOS, E. and SEGERSTROM, P. (1999) “A Schumpeterian Model of Protection and Relative Wages”, American Economic Review 89, 450-472.

DINOPOULOS, E. and SYROPOULOS, C. (2000), “ Innovation and Rent Protection in the Theory of Schumpeterian Growth” (Manuscript, University of Florida).

DINOPOULOS, E. and SYROPOULOS, C. (2001), “Globalization and Scale-Invariant Growth”, (University of Florida, Department of Economics Working Paper).

DINOPOULOS, E. and THOMPSON, P. (1996), “A Contribution to the Empirics of Endogenous Growth”, Eastern Economic Journal, 22, 389-400. DINOPOULOS, E. and THOMPSON, P. (1998), “Schumpeterian Growth without Scale Effects”, Journal of Economic Growth, 3, 313-335.

DINOPOULOS, E. and THOMPSON, P. (1999), “Scale Effects in Schumpeterian Models of Economic Growth”, Journal of Evolutionary Economics, 9, 157-185.

DORNBUSCH, R., FISCHER S., and SAMUELSON P.A. (1977), “Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods”, American Economic Review, 67, 823-839.

GROSSMAN, G. M. and HELPMAN, E. (1990), “Comparative Advantage and Long-Run Growth”, American Economic Review, 80, 796-815.

GROSSMAN, G. M. and HELPMAN, E. (1991a), “Endogenous Product Cycles”, Economic Journal, 101, 1214-1244.

GROSSMAN, G. M. and HELPMAN, E. (1991b), “Quality Ladders and Product Cycles”, Quarterly Journal of Economics, 425, 557-586.

GROSSMAN, G. M. and HELPMAN, E. (1991c), “Quality Ladders in the Theory of Growth”, Review of Economic Studies, 59, 43-61.

HELPMAN, E. and KRUGMAN P. R. (1989), Trade Policy and Market Structure. (Cambridge, MA: MIT Press).

JONES, C. (1995a), “Time-Series Tests of Endogenous Growth Models”, Quarterly Journal of Economics, 110, 495-525.

JONES, C. (1995b), “R&D-Based Models of Economic Growth”, Journal of Political Economy, 103, 759-784.

KRUGMAN, P. R. (1987), “The Narrow Moving Band, the Dutch Disease and the Competitive Consequences of Mrs. Thatcher”, Journal of Development Economics, 27, 41-55.

PETSAS, I. (2003), “The Dynamic Effects of General Purpose Technologies on Schumpeterian Growth”, Journal of Evolutionary Economics, 13, 577-605.

SEGERSTROM, P. (1998), “Endogenous Growth without Scale Effects”, American Economic Review, 88, 1290-1310.

SEGERSTROM, P. and ZOLNIEREK, J. (1999), “The R&D Incentives of Industry Leaders”, International Economic Review, 40, 745-766.

TAYLOR, M. S. (1993), “‘Quality Ladders’ and Ricardian Trade”, Journal of International Economics, 34, 225-243.

YOUNG, A. (1998), “Growth without Scale Effects”, Journal of Political Economy, 106, 41-63.