Research, Technology, and Comparative Advantage

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The purpose of this research is to analyze the dynamics of innovation and technological diffusion in the world economy. One component of this research is to specify and to estimate a model of productivity differences and patterns of trade, given the allocation of technological knowledge across countries and sectors. The model implies that, given the distribution of technical knowledge, trade can influence observed measures of productivity, so that these measures reflect underlying access to technology indirectly. Using the model's implications for trade flows and productivity, the parameters of the model will be estimated with international data on these magnitudes. The second component of the research is to specify and to estimate a dynamic model of sectoral innovation and technology diffusion underlying this static trade model. Different countries may serve as the major innovators in specific industries, and the speed of diffusion may depend on the technology in question and the countries involved. The model incorporates the decision to innovate and to patent innovations in different countries. This model can be used to infer the sources of innovation and the direction of technology flow from sectoral data on research input, productivity, and international patenting. Together, the two components of the research have implications for: (i) which countries are the major innovators and contributors to productivity growth in different sectors; (ii) the extent to which other countries benefit from these innovations, either through diffusion or through trade; (iii) how innovation and technology diffusion affect observed patterns of productivity and trade; and (iv) how barriers to trade affect productivity and growth.