Working Paper: NBER ID: w30590
Authors: Nelson Lind; Natalia Ramondo
Abstract: We study the global innovation and diffusion of ideas by introducing trade into the model in Eaton and Kortum (1999) (EK). This extension allows us to use international trade flows and country-level factor costs to estimate both the intensity of innovation within countries over time and diffusion rates across countries. We find significant specialization across the globe: some countries have high innovation rates, while other countries rely on diffusion. Although innovation is correlated with economic growth, there are many high income countries that primarily produce using diffused ideas. Additionally, these patterns shift over time — we estimate that a wave of innovation began in China during the early-2000’s, reducing its reliance on diffused technology.
Keywords: innovation; trade flows; economic growth; knowledge diffusion
JEL Codes: F10; F03; F04
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| innovation (O35) | economic growth (O49) |
| diffusion (F22) | productivity (O49) |
| trade (F19) | understanding of innovation and diffusion model (O35) |
| innovation rates (O39) | economic growth (O49) |
| trade flows (F10) | innovation rates (O39) |
| China's innovation wave (O36) | shift from diffusion to domestic innovation (O39) |