Munich Personal RePEc Archive

Innovation, Diffusion, and Trade: Theory and Measurement

Santacreu, Ana Maria (2011): Innovation, Diffusion, and Trade: Theory and Measurement.

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Abstract

Growth and imports are correlated across countries, but the mechanisms underlying this relationship are not well understood. I develop a multi-country model in which imports and growth are connected by technological innovations and their international diffusion through trade. Fitting the model to data on innovation, productivity, and trade in varieties, I find that most of the growth-imports correlation is explained by these two mechanisms. I also find that the trade channel has been particularly important in developing countries, accounting for about three-fourths of their growth. Finally, I run counterfactuals analysis.

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