Trade Liberalization and Technology Diffusion

摘要

The paper considers the role of technology diffusion and trade liberalization for the catching-up of structurally backward countries. A New Economic Geography model is presented that accounts for firm entry/exit and international mobility of skilled labor employed in public R&D sectors. This raises the traditional agglomeration effects in a core-periphery setting as firms and mobile factors usually cluster within spatial agglomerations. With international technology diffusion, however, there is a counteracting effect on the traditional agglomeration effects as firms in the periphery also benefit from increasing R&D expenditures in the core lowering entry costs for firms. It is found that the catching-up of structurally backward countries is spurred not only as a result of trade integration but also because of technology diffusion.