NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Innovation and Production in the Global Economy

Costas Arkolakis, Natalia Ramondo, Andrés Rodríguez-Clare, Stephen Yeaple

NBER Working Paper No. 18972
Issued in April 2013
NBER Program(s):   ITI

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.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18972

Users who downloaded this paper also downloaded these:
Antràs and Yeaple w18775 Multinational Firms and the Structure of International Trade
Baldwin and Lopez-Gonzalez w18957 Supply-Chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses
Helpman w19057 Foreign Trade and Investment: Firm-Level Perspectives
Acemoglu, Akcigit, Bloom, and Kerr w18993 Innovation, Reallocation and Growth
Comin and Mestieri w19052 Technology Diffusion: Measurement, Causes and Consequences
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us