Premium
Learning by Doing and Fragmentation
Author(s) -
Bond Eric W.,
Ma Yan
Publication year - 2013
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12043
Subject(s) - economics , fragmentation (computing) , neighbourhood (mathematics) , production (economics) , microeconomics , competitive equilibrium , frontier , mathematics , geography , biology , ecology , mathematical analysis , archaeology
We analyse the competitive equilibrium and socially optimal allocation of production fragments in a two‐country model where there is learning by doing with spillovers between fragments in the home country. We distinguish between forward and backward knowledge linkages, where learning results from producing products that are less (more) complex than the current knowledge frontier with forward (backward) linkages. We compare the pattern of comparative advantage in the competitive and socially optimal cases, and compare the intensive and extensive margins of fragments produced at home in the two cases. We establish a sufficient condition for the range of fragments produced at home to be non‐decreasing with forward linkages. We also show that with backward linkages, the home country will produce some fragments in the neighbourhood of the steady state that are more complex than those produced in the steady state.