Innovation and Production in the Global Economy

By Costas Arkolakis, N. Ramondo, A. Rodríguez-Clare, S. Yeaple. The American Economic Review, 2018

274 citations recorded by the source corpus.

We develop a quantifiable general equilibrium model of trade and multinational production (MP) in which countries can specialize in innovation or production. Home market effects or comparative advantage leads some countries to specialize in innovation and relegate manufacturing operations to other countries via outward MP. Counterfactual analysis reveals that the reduction in the cost of MP or the integration of China into the world economy may hurt countries that are driven to specialize in production, although these losses tend to be very small. Contrary to popular fears, production workers gain even in countries that further specialize in innovation. (JEL D58, F12, F14, F23, L60, O31)

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/7b3c3bfeea659d5ef57c41634e9a50640fa6fcc9

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Citations in the corpus

An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model (2016, methodology): “1, the structural gravity framework was derived from the demand side assuming an Armington (1969) setting with CES preferences.”
Quantitative Spatial Economics (2017, unknown): “In the international trade literature, several studies have explored the implications of frictions that reduce the productivity of ideas when transferred to other countries through foreign direct investment (see, in particular, Arkolakis et al. 2014). Within countries, a firm that enters and develop”
Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms (2016, unknown): “, Coibion, Gorodnichenko and Wieland (2012); Arkolakis et al. (2013)) in order to obtain εLD values that are closer to those used in the labor literature (Hamermesh, 1993).”
Trade, Domestic Frictions, and Scale Effects (2016, unknown): “Together with (1 + η)/θ = 1/4 and the recalibration of dnn to maintain (12), this implies that there is no difference in the role of domestic frictions here with respect to the model of Section 2.”