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Sustained Comparative Advantage and Semi‐Endogenous Growth
Author(s) -
Petsas Iordanis
Publication year - 2010
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2009.00537.x
Subject(s) - economics , endogenous growth theory , comparative advantage , returns to scale , production (economics) , scale effects , wage , general equilibrium theory , microeconomics , monetary economics , scale (ratio) , labour economics , international trade , market economy , human capital , physics , quantum mechanics
This paper constructs a two‐country (Home and Foreign) general‐equilibrium model of Schumpeterian growth without scale effects. The scale effects property is removed by introducing a distinct specification in the knowledge production function which generates semi‐endogenous growth. In this model of semi‐endogenous growth, an increase in the rate of population growth rate raises Home's relative wage and lowers its range of goods exported to Foreign. An increase in the size of innovations increases Home's relative wage but with an ambiguous effect on its comparative advantage. The model generates a unique steady‐state equilibrium in which there is complete specialization in both goods and R&D production within each country.