Federal Reserve Bank of Chicago
Working Paper Series
The Global Diffusion of Ideas
We provide a tractable theory of innovation and technology diffusion to explore the role of international trade in the process of development. We model innovation and diffusion as a process involving the combination of new ideas with insights from other industries or countries. We provide conditions under which each country's equilibrium frontier of knowledge converges to a Frechet distribution, and derive a system of differential equations describing the evolution of the scale parameters of these distributions, i.e., countries' stocks of knowledge. In particular, the growth of a country's stock of knowledge depends only on its trade shares and the stocks of knowledge of its trading partners. We use the framework to quantify the contribution of bilateral trade costs to cross-sectional TFP differences, long-run changes in TFP, and individual post-war growth miracles.
Cite this item
Francisco J. Buera & Ezra Oberfield, The Global Diffusion of Ideas, Federal Reserve Bank of Chicago, Working Paper Series WP-2016-13, 31 Dec 2015.
- F1 - International Economics - - Trade
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
Keywords: Frechet distribution; global outlook; technology diffusion; trade
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