International Trade and Innovation
This chapter was prepared for the Handbook of International Economics (Vol. 5) edited by Gita Gopinath, Elhanan Helpman, and Kenneth Rogoff. We provide a review of the recent literature -- both theoretical and empirical -- analyzing the multi-dimensional connections between globalization and innovation. We develop a model that features many of those mechanisms that connect trade and innovation. It features the joint selection of firms into innovation and international market participation (in our model, we restrict that participation to exports). Our model also highlights how exposure to international markets affects the incentives for innovation.
We thank Sina Ates, Elhanan Helpman, Ezra Oberfield, and Thomas Sampson for their valuable comments and discussions; and Marcos Sora for his superb research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.