[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/red/sed011/984.html
   My bibliography  Save this paper

Trade and Idea Flows

Author

Listed:
  • Robert E. Lucas

    (University of Chicago)

  • Francisco J. Buera

    (UCLA)

  • Fernando Alvarez

    (University of Chicago)

Abstract
This paper extends the work in Alvarez, Buera, and Lucas (2007) to a collection of open economies linked by trade flows. We model the technology of an economy as described by a probability distribution of available costs --– in the sense of labor or other resource requirements --– for producing different goods. Following Kortum (1997), we call such a distribution a technology frontier. An individual potential producer is characterized by his current cost level --– a random variable drawn from the frontier distribution –-- and is also subject to a stochastic flow of new ideas –-- new cost levels. When he receives a cost idea that is better than the one he is able to produce with he adopts it and this new cost becomes his state. If he receives a higher cost idea, or no idea at all, his cost state remains unchanged. The flow of new ideas-new cost levels are random draws from the distribution of sellers to the market where a potential producer is located. As in Eaton and Kortum (2002), the distribution of sellers to a particular market is a function of the world technology frontier, the matrices of trade costs and trade barriers, and the world-wide vector of factor prices. We show that the evolution of the world technological frontier can be described by a system of delay differential equations, and present an algorithm that can be used to solve for the world technological frontier. We present numerical examples where trade barriers lead to a worse distribution of ideas, in that the technology frontier in a world with high trade barriers is stochastically dominated but the technology frontier in a world with low trade barriers.

Suggested Citation

  • Robert E. Lucas & Francisco J. Buera & Fernando Alvarez, 2011. "Trade and Idea Flows," 2011 Meeting Papers 984, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:984
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2011/paper_984.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Comin, Diego & Mestieri, Martí, 2014. "Technology Diffusion: Measurement, Causes, and Consequences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 565-622, Elsevier.
    2. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2014. "Catch-up and fall-back through innovation and imitation," Journal of Economic Growth, Springer, vol. 19(1), pages 1-35, March.
    3. Thomas Sampson, 2016. "Dynamic Selection: An Idea Flows Theory of Entry, Trade, and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 315-380.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed011:984. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.