Working Paper Series, Department of Economics, Uppsala University
No 2010:6:
Innovation and Imitation in a Model of North-South TradeRecent evidence on world trade patterns reveals North-South specialization across
Teodora Borota ()
Abstract: Recent evidence on world trade patterns reveals
North-South specialization across products of the same industries and
product groups but different quality, which is not matched by the
predictions of traditional and new trade theory. This paper analyzes a
model of North-South trade and endogenous growth through innovation and
imitation that can predict the observed trade patterns. The model is used
to re-examine the impact of trade and Intellectual Property Rights (IPR)
protection on both the innovation in the North and the imitational lag of
the South. Opening to trade increases the growth rate and welfare of both
regions, but results in a larger lag in the quality level of the South.
With free trade the quality lag of the South is positive even with no IPR
protection as a result of a revealed comparative advantage in lower quality
goods production and trade. This contradicts the common predictions of
Southern take-over of the whole industries due to bad IPR enforcement.
Stronger IPR protection has a negative effect on growth and deteriorates
the lag of the South, but the welfare effects of the alternative IPR policy
instruments may be different.
Keywords: North-South trade; quality heterogeneity; endogenous growth; innovation and imitation; intellectual property rights; (follow links to similar papers)
JEL-Codes: F12; F43; O31; O33; O34; (follow links to similar papers)
44 pages, April 9, 2010
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