《Trade and uneven growth》.pdf

NBER WORKING PAPER SERIES TRADE A1D UNEVEN CROtflH Robert Feenstra Working Paper No. 3276 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 March 1990 The research for this paper was completed while the author was visiting at the Institute for Advanced Studies, Hebrew University of Jerusalem. He thanks Gene Grossman, Elhanan Helpman and Joaquim Silvestre for very helpful discussions. This paper is part of NEERs research program in International Studies. Any opinions expressed are those of the author and not those of the National Bureau of Economic Research. NBER Working Paper #3276 March 1990 TRADE AND UNEVEN GROWTH ABSTRACT We consider trade between two countries of unequal size, where the creation of new intermediate inputs occurs in both. We assume that the knowledge gained from RD in one country does not spillover to the other. Under autarky. the larger country would have a higher rate of product creation. When trade occurs in the final goods, we find that the smalLer country has its rate of product creation stowed, even in the long run. In contrast, the larger êountry enjogs a temporary increase in its rate of RD. We also examine the welfare consequences of trade in the final goods, which depend on whether the intermediate inputs are traded or not. Robert Feenstra Department of Economics University of California Davis, CA 95616