Innovation, standardization, and imitation in the product cycle model

We develop a product cycle that is much more akin to Vernon's original vision of the product cycle, in which standardization of production techniques is required for the international transfer of technology to the developing South. We show that, since stronger intellectual property rights (IPR) encourages standardization and thus technology transfer, it can enhance the long-run innovation rate in the developed North. This is because less production remains in the North, which leaves more resources in the North for R&D activity. Specifically, we show the possibility of an inverted-U relationship between IPR and innovation (and resulting economic growth). Our result suggests that a balanced approach (not too strong and not too weak) is required to enhance economic growth in the world economy.

From China with love: Effects of the Chinese economy on skill-biased technical change in the US

In this study, we analyze the effects of labor shortage in China on the direction of innovation in the US by incorporating production offshoring into a North-South model of directed technical change. We �find that if offshoring is present (absent) in equilibrium, then a decrease (an increase) in unskilled labor in the South would lead to skill-biased technical change in the North. This fi�nding highlights the different implications of offshoring and conventional trade on innovation. Furthermore, we �find that an increase in the Southern stock of capital reduces offshoring and also leads to skill-biased technical change. Therefore, rapid capital accumulation and labor shortage in China could lead to a rising skill premium in the US. Calibrating the model to China-US data, we �find that a 1% decrease in unskilled labor (1% increase in capital) in China leads to a 0.8% (0.6%) increase in the skill premium in the US under a moderate elasticity of substitution between skill-intensive and labor-intensive goods

The Struggle to Survive in the R&D Sector: Implications for Innovation and Growth

By allowing for investment activities by research and development (R&D) firms to prevent product obsolescence, we show that if legal patent protection is too strong, a higher R&D subsidy rate delivers insufficient investments for survival in the R&D sector, depressing innovation and growth in the long run

Perpetual leapfrogging in international competition

Technological leadership has shifted at various times from one country to another. This analysis proposes a mechanism that endogenously explains this perpetual cycle of technological leapfrogging by incorporating international knowledge spillovers into a two-country dynamic model of innovation with the dynamic optimization of an infinitely-lived consumer. In the model, innovation productivity in each country endogenously increases over time because of domestic learning-by-doing and learning from foreign capital. The analysis shows that if international spillovers through learning from foreign capital are sufficiently large, technological leadership may first shift from one country to another, and then perpetually alternate between the two countries

The Struggle to Survive in the R&D Sector: Implications for Innovation and Growth

By allowing for investment activities by research and development (R&D) firms to prevent product obsolescence, we show that if legal patent protection is too strong, a higher R&D subsidy rate delivers insufficient investments for survival in the R&D sector, depressing innovation and growth in the long run

Leapfrogging Cycles in International Competition

Technological leadership has shifted at various times from one country to another. We propose a mechanism that endogenously explains this perpetual cycle of technological leapfrogging in a two-country model including the dynamic optimization of an infinitely-lived consumer. In the model, the stock of knowledge accumulates in each country over time because of domestic innovation and spillovers from foreign innovation. We show that if the international knowledge spillovers are reasonably efficient, technological leadership may shift first from one country to another, and then alternate between countries along an equilibrium path

Perpetual leapfrogging in international competition

Technological leadership has shifted at various times from one country to another. We propose a mechanism that explains this perpetual cycle of technological leapfrogging by incorporating knowledge spillovers into a two-country model of innovation including the dynamic optimization of an infinitely lived consumer. In the model, the stock of knowledge accumulates in each country over time because of domestic innovation and spillovers from foreign innovation, while spillovers take place through imitation and foreign direct investment. We show that if the rate of imitation is high, only the technologically leading country innovates in equilibrium (a North-South regime) where leapfrogging never arises. Conversely, if the imitation rate is sufficiently low, both countries innovate in equilibrium (a North-North regime), and so technological leadership may shift first from one country to another, and then if the international spillovers are sufficiently efficient, may perpetually alternate between the two along an equilibrium path

Perpetual leapfrogging in international competition

Technological leadership has shifted at various times from one country to another. We propose a mechanism that explains this perpetual cycle of technological leapfrogging by incorporating knowledge spillovers into a two-country model of innovation including the dynamic optimization of an infinitely lived consumer. In the model, the stock of knowledge accumulates in each country over time because of domestic innovation and spillovers from foreign innovation, while spillovers take place through imitation and foreign direct investment. We show that if the rate of imitation is high, only the technologically leading country innovates in equilibrium (a North-South regime) where leapfrogging never arises. Conversely, if the imitation rate is sufficiently low, both countries innovate in equilibrium (a North-North regime), and so technological leadership may shift first from one country to another, and then if the international spillovers are sufficiently efficient, may perpetually alternate between the two along an equilibrium path