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Journal of Evolutionary Economics

, Volume 3, Issue 2, pp 109–126 | Cite as

Technology gap and international trade: an evolutionary model

  • Giovanni Maggi
Article

Abstract

We propose a model of the international technology gap that focuses on two sources of self-reinforcing mechanisms in the industrial competition: (i) a positive feedback that runs from innovations to profits to R & D expenditures, and (ii) learning effects in R & D and in production. We find that, if the cost of labor is lower in the late-starter country, several dynamic paths are possible, including one in which the late-starter catches up and then reverses the technology gap. When international diffusion of technology is introduced, the system has a bifurcation structure: if technology diffusion is relatively slow, there are two steady-state levels of the technology gap, one in favor of each country; if diffusion is fast, there is a unique stable equilibrium gap in favor of the country that has an exogenous (“Ricardian”) cost advantage.

Key words

International trade Technology gap Self-reinforcing mechanisms 

JEL-classification

F12-030 

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Copyright information

© Springer-Verlag 1993

Authors and Affiliations

  • Giovanni Maggi
    • 1
  1. 1.Department of EconomicsStanford UniversityStanfordUSA

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