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The Global Diffusion of Ideas

Author

Listed:
  • Francisco J. Buera
  • Ezra Oberfield
Abstract
We provide a tractable, quantitatively‐oriented theory of innovation and technology diffusion to explore the role of international trade in the process of development. We model innovation and diffusion as a process involving the combination of new ideas with insights from other industries or countries. We provide conditions under which each country's equilibrium frontier of knowledge converges to a Fréchet distribution, and derive a system of differential equations describing the evolution of the scale parameters of these distributions, that is, countries' stocks of knowledge. The model remains tractable with many asymmetric countries and generates a rich set of predictions about how the level and composition of trade affect countries' frontiers of knowledge. We use the framework to quantify the contribution of bilateral trade costs to long‐run changes in TFP and individual post‐war growth miracles. For our preferred calibration, we find that both gains from trade and the fraction of variation of TFP growth accounted for by changes in trade more than double relative to a model without diffusion.

Suggested Citation

  • Francisco J. Buera & Ezra Oberfield, 2020. "The Global Diffusion of Ideas," Econometrica, Econometric Society, vol. 88(1), pages 83-114, January.
    • Handle: RePEc:wly:emetrp:v:88:y:2020:i:1:p:83-114
    DOI: 10.3982/ECTA14044
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    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • F1 - International Economics - - Trade

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