MARKETS, EXTERNALITIES, AND THE DYNAMIC GAINS OF OPENNESS

Autor:	Alexander Monge-Naranjo
Rok vydání:	2019
Předmět:	Economics and Econometrics Public economics media_common.quotation_subject 05 social sciences Monetary policy Developing country Monetary economics Interest rate Incentive Economic indicator 0502 economics and business Openness to experience Economics 050207 economics Productivity Externality 050205 econometrics media_common
Zdroj:	International Economic Review. 60:1131-1170
ISSN:	1468-2354 0020-6598
DOI:	10.1111/iere.12381
Popis:	Inflows of foreign knowledge can be the key for developing countries to catch up with the world technology frontier. In this paper, I construct a simple tractable model to analyze (a) the incentives of foreign firms to bring their know-how to a developing country and (b) the incentives of domestic firms to invest in their own know-how. The model embeds the two mechanisms typically considered separately in the literature for the diffusion of knowledge: Externalities and Markets. The relative preponderance of these mechanisms significantly changes the dynamic implications of openness. Notably, openness allows developing countries to fully catch up only when market transactions fully dominate the diffusion of ideas. While externalities can also push domestic firms to upgrade their productivity, the equilibrium exposure to ideas in the country is always below the frontier and asymptotically the country would remain importing foreign know-how. However, in general, the dynamic gains of openness are substantial.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::7c12faf26440735b3d2f917eda802320 https://doi.org/10.1111/iere.12381 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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