Innovation, Diffusion, And Trade: Theory And Measurement
Growth and imports are correlated across countries. However, the underlying mechanisms remain poorly understood. The author develops a general equilibrium model in which imports and growth are connected by technological innovation and international diffusion through trade. Fitting the model to data on innovation, productivity, and trade in varieties, the author find that most of the correlation is explained by these two mechanisms. Moreover, adoption has been particularly important in developing countries, accounting for about 80% of their growth in the last decade. Finally, the author carries out a counterfactual analysis to examine the connections between trade and growth.