Working Paper: NBER ID: w12385
Authors: Jonathan Eaton; Samuel Kortum
Abstract: We explore the determinants of research specialization across countries and its consequences for relative wages. Using a dynamic Ricardian model we examine the effects of faster international technology diffusion and lower trade barriers on the incentive to innovate. In the absence of any diffusion at all, countries devote the same share of resources toward research regardless of trade barriers or research productivity. As long as trade barriers are not too high, faster diffusion shifts research activity toward the country that does it better. This shift in research activity raises the relative wage there. It can even mean that, with more diffusion, the country better at research ends up with a larger share of technologies in its exclusive domain.
Keywords: No keywords provided
JEL Codes: F1; O3; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| faster international technology diffusion (O33) | incentive to innovate (O31) |
| lower trade barriers (F19) | incentive to innovate (O31) |
| faster international technology diffusion (O33) | research resources shift towards efficient innovating countries (O39) |
| research resources shift towards efficient innovating countries (O39) | increase in relative wages in those countries (F66) |
| no diffusion (Y70) | countries allocate identical shares of resources to research (H59) |
| trade barriers in scenarios of no diffusion (F12) | null effect on innovation (O35) |