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Contagion Through Interactive Production and Dynamic Effects of Trade
Author(s) -
Xie Xin
Publication year - 1999
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.00010
Subject(s) - backwardness , complementarity (molecular biology) , economics , production (economics) , endogenous growth theory , divergence (linguistics) , convergence (economics) , technological change , international trade , international economics , microeconomics , macroeconomics , neoclassical economics , market economy , human capital , linguistics , philosophy , genetics , biology
This paper produces three main results in a two‐country model where learning is generated through interactive production. First, it endogenizes the incidence of international spillovers and consequently, integrates the convergence and divergence literature of endogenous growth. Second, it qualifies the notion of ‘the advantage of backwardness’ and shows that a large technology gap may reduce cross‐country spillovers. Third, it points out that besides the already recognized ‘contagion effect,’ trade also promotes technological progress in the LDC through a ‘complementarity effect’ that shifts the resources in the LDC toward the production of more sophisticated intermediate products.