Innovation, Diffusion and Trade

Transcription

1 Innovation, Diffusion and Trade Theory and Measurement Ana Maria Santacreu NYU Innovation, Diffusion and Trade p. 1/14

2 Motivation China GDPpc growth(*) Ireland Poland Korea Hungary Slovakia Slovenia Finland Singapore UKSpain Greece Sweden Portugal Thailand Romania AustriaBelgium France Denmark Netherlands Bulgaria USA HK Italy Germany Japan Latvia Lithuania Malaysia Vietnam India Growth in imported varieties (*) PPP adjusted Average over Innovation, Diffusion and Trade p. 2/14

3 Motivation Japan R&D investment(*) Sweden USA Singapore France UK Austria Belgium Finland Korea Netherlands Slovenia Ireland Denmark Spain Slovakia Portugal Poland Greece HK Italy Germany Romania Bulgaria China Thailand Hungary Lithuania Latvia Malaysia VietnamIndia Growth in imported varieties (*) Share of researchers over population (thousands) Average over Innovation, Diffusion and Trade p. 3/14

4 Questions What is behind the connections between trade in varieties and economic growth? Innovation Adoption Can we quantify the connections? New measure of trade: number of varieties What are the sources of productivity growth? Counterfactuals: Policy implications Innovation, Diffusion and Trade p. 4/14

5 The approach Develop a multicountry growth model, with embodied technology, in which growth is driven by the introduction of new goods (Romer 1987) Innovation and technology diffusion: Both endogenous processes (Eaton and Kortum (1996, 1999), Parente and Prescott (1994), Comin and Gertler (2006)) Trade in varieties as the vehicle of diffusion (Rivera-Batiz and Romer (1991) and Broda, Greenfield and Weinstein (2008)) Solve for the transitional dynamics of the model Bayesian estimation of innovation and diffusion parameters Innovation, Diffusion and Trade p. 5/14

6 The model Endowment of labor: intermediate production, innovation and adoption Representative consumer that consumes a non-traded final good Final good is an aggregator of traded intermediate products: Love for variety Intermediate producers are monopolistic competitors Trade is costly: iceberg transport cost Different prices in different markets Affects the amount of each intermediate good that is traded Innovation and adoption: introducing own and foreign new technologies Close the model: Labor market clearing condition Innovation, Diffusion and Trade p. 6/14

7 Endogenous Innovation and diffusion Innovation sector invests labor to create a new technology: Theoretical level of technology A set of competitive entrepreneurs bid for the right to produce the good Once they produce the good Instantaneous diffusion within the country: Actual level of technology (domestic) Slow diffusion across countries: Actual level of technology (foreign) Two optimal decisions: How much labor to allocate to either innovation or adoption Innovation, Diffusion and Trade p. 7/14

8 Domestic Innovation technology The number of new created goods depends on: Amount of labor allocated to R&D Productivity of innovation: Number of intermediate goods available for final production: Spillover effect Productivity of innovation: policy parameter (e.g: strong patent system) Innovation, Diffusion and Trade p. 8/14

9 Foreign Adoption Technology The number of new adopted foreign goods depends on: Probability of adoption Amount of labor allocated to adoption Costs to transfer foreign technology: policy parameter (e.g: trade policy) Technology gap: Catching-up effect Innovation, Diffusion and Trade p. 9/14

10 The Steady State All countries grow at a common constant rate Countries differ in relative productivities depending on the parameters of innovation and adoption. Differences in growth rates arise in the transition Innovation, Diffusion and Trade p. 10/14

11 Estimation: Data and Priors Bayesian estimation Data: growth in varieties, number of engineers and scientists, output growth Calibrated parameters: previous studies and steady state relations Estimated parameters: diffusion and adoption Innovation, Diffusion and Trade p. 11/14

12 Decomposition of embodied productivity growth To From Asia EU- EU+ Japan US Asia EU EU Japan US Innovation, Diffusion and Trade p. 12/14

13 A 10% decrease in adoption barriers in Asia Asia Z Asia /Z US (solid); A /ZUS US (Dashed) Research Intensity (solid Asia; Dashed US) Growth Rates (solid Asia; Dashed US) Variable % change r(asia) -0.15% r(u S) 0.54% g 0.4% ω(asia) ω(u S) 0.03% Relative wages w US /w Asia Innovation, Diffusion and Trade p. 13/14

14 Conclusion What are the mechanisms behind the connections between trade in varieties and economic growth? Trade is a measure of technology diffusion 90% of productivity growth in Asia is explained by an increase in the variety of goods Main contributors of productivity growth main innovators: US, Japan Policy implications A decrease in costs to transfer technologies in Asia generates both higher imports of varieties and higher economic growth Asia becomes closer to the technology frontier, but the income gap persists Need to apply policies that foster innovation in order to catch-up completeley Innovation, Diffusion and Trade p. 14/14