<abstract xmlns="http://www.w3.org/1999/xhtml"><p> This paper develops a simple model of trade and “quality-ladders” growth without scale effects to study the implications of general purpose technologies (GPTs) for international trade. GPTs refer to a certain type of drastic innovations, such as electrification, the transistor, and the Internet, that are characterized by the pervasiveness in use, innovational complementarities, and technological dynamism. The model presents a two-country (Home and Foreign) dynamic general equilibrium framework and incorporates GPT diffusion within Home that exhibits endogenous Schumpeterian growth. The model analyzes the long-run and transitional dynamic effects of a new GPT on the pattern of trade and relative wages. The main findings of the paper are: 1) when the GPT diffusion across industries is governed by S-curve dynamics, there are two steady-state equilibria: the initial steadystate arises before the adoption of the new GPT and the final one is reached after the GPT diffusion process has been completed, 2) when all industries at Home have adopted the new GPT, Home enjoys comparative advantage in a greater range of industries compared to Foreign, 3) during the transitional dynamics, Foreign gains back its competitiveness in some of the industries that lost its comparative advantage to Home.</p></abstract>

This paper develops a simple model of trade and “quality-ladders” growth without scale effects to study the implications of general purpose technologies (GPTs) for international trade. GPTs refer to a certain type of drastic innovations, such as electrification, the transistor, and the Internet, that are characterized by the pervasiveness in use, innovational complementarities, and technological dynamism. The model presents a two-country (Home and Foreign) dynamic general equilibrium framework and incorporates GPT diffusion within Home that exhibits endogenous Schumpeterian growth. The model analyzes the long-run and transitional dynamic effects of a new GPT on the pattern of trade and relative wages. The main findings of the paper are: 1) when the GPT diffusion across industries is governed by S-curve dynamics, there are two steady-state equilibria: the initial steadystate arises before the adoption of the new GPT and the final one is reached after the GPT diffusion process has been completed, 2) when all industries at Home have adopted the new GPT, Home enjoys comparative advantage in a greater range of industries compared to Foreign, 3) during the transitional dynamics, Foreign gains back its competitiveness in some of the industries that lost its comparative advantage to Home.

General Purpose Technologies and their Implications for International Trade

Department of Economics and Finance, Kania School of Management, University of Scranton, Scranton, PA., USA

International Journal of Management and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"General Purpose Technologies and their Implications for International Trade"}

This paper develops a simple model of trade and “quality-ladders” growth without scale effects to study the implications of general purpose technologies (GPTs)...

General Purpose Technologies and their Implications for International Trade

Published Online: Dec 04, 2015

Page range: 7 - 35

DOI: https://doi.org/10.1515/ijme-2015-0026

Keywords
general purpose technologies, Schumpeterian growth, comparative advantage, scale effects, R&D races

© 2015

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

General Purpose Technologies and their Implications for International Trade

Published Online: Dec 04, 2015

Page range: 7 - 35

DOI: https://doi.org/10.1515/ijme-2015-0026

Keywordsgeneral purpose technologies, Schumpeterian growth, comparative advantage, scale effects, R&D races

© 2015

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
general purpose technologies, Schumpeterian growth, comparative advantage, scale effects, R&D races