NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Innovation, Knowledge Diffusion, and Globalization

Nelson Lind, Natalia Ramondo

NBER Working Paper No. 25071
Issued in September 2018
NBER Program(s):Economic Fluctuations and Growth, International Trade and Investment

We review a recent body of theoretical literature that links the creation and diffusion of knowledge and technology to openness. We analyze two channels through which the spread of new ideas occurs: international trade and the activity of multinational firms (multinational production). The unifying theme of our survey is methodological. We focus on quantitative general equilibrium models that treat productivities as Fréchet random variables—as in the model of trade in Eaton and Kortum (2002) (EK). We present models in the literature that extend the EK model of trade to innovation, diffusion, and multinational firms, and examine the implications for counterfactuals related to the gains from trade. We finalize with new directions for research.

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Document Object Identifier (DOI): 10.3386/w25071

 
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