TITLE:
Education, Innovation and Growth in Quality-Ladder Models of North-North Trade
AUTHORS:
Manfred Stadler
KEYWORDS:
Education, Innovation, Export Adaptation, Industry Dynamics, Economic Growth
JOURNAL NAME:
Modern Economy,
Vol.6 No.10,
October
30,
2015
ABSTRACT: This paper extends and surveys some basic quality-ladder models of
education, innovation and trade in order to explain the dynamics of
technological change and aggregate growth in developed countries. We analyze
how the stochastic processes of innovation and export adaptation are affected
by asymmetric factor endowments, transport costs, and barriers to entry in
foreign markets. We show that the country-specific innovation rates are
permanently increasing in the effectiveness of education and the countries’
relative endowment with labor. Trade liberalization leads to a temporary
increase in the innovation rates but to a permanent increase in the rates of
export adaptation.