DMCA
Innovation and Production in the Global Economy (2013)
| Citations: | 3 - 0 self |
BibTeX
@MISC{Arkolakis13innovationand,
author = {Costas Arkolakis and Natalia Ramondo and Andrés Rodríguez-clare and Stephen Yeaple},
title = {Innovation and Production in the Global Economy},
year = {2013}
}
Share
 |
 |
 |
 |
||
OpenURL
Abstract
One feature of globalization is that countries are increasingly specialized in either innovation or in production. To understand the forces behind this specialization and its welfare consequences, we develop a monopolistic competition model of trade and multinational production (MP) in which firms face a tradeoff between producing close to customers and producing in the least-cost location. At the country level, the location of innovation and production is determined by comparative advantage and home market effects that arise from the interaction of trade and MP costs with increasing returns to scale. The model yields simple structural expressions for bilateral trade and MP that we use to calibrate the model across a set of OECD countries. Our counterfactual exercises shed light on the effect of falling MP costs, and the entry of China into world markets, on welfare between and within countries. We thank Pol Antras, Ariel Burstein, Arnaud Costinot, Jonathan Eaton, Gene Grossman, Samuel Kortum, James Markusen, Felix Tintelnot, and Jonathan Vogel, as well as seminar participants at several seminars and conferences for insightful comments. We also thank Treb Allen and Jakub Kominiarczuk for excellent research
Keyphrases
global economy mp cost james markusen jakub kominiarczuk oecd country insightful comment samuel kortum monopolistic competition model model yield simple structural expression seminar participant bilateral trade several seminar multinational production ariel burstein jonathan vogel welfare consequence home market effect excellent research pol antras counterfactual exercise comparative advantage world market gene grossman jonathan eaton treb allen arnaud costinot least-cost location country level felix tintelnot
