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The Effects of Opening Trade on Regional Inequality in a Model of Scale-Invariant Growth and Foot-Loose Capital
Graduate School of Economics, Kobe University, Kobe, Japan
- 1 Graduate School of Economics, Kobe University, Kobe, Japan
Theoretical Economics Letters·Volume 02 (2012)·Pages 423–430·Published 19 December 2012·DOI10.4236/tel.2012.25078
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Abstract
We consider a semi endogenous R & D growth model with international trade, foot-loose capital, and local and international knowledge spillovers in a closed economy and also international knowledge spillovers in an open economy. We show that by opening trade two regions diverge (converge) with (not) sufficiently high intertemporal knowledge spillover in the R & D sector and elasticity of substitution between modern goods, and not sufficiently high (sufficiently high) richer country A’s share of firm owned.
KeywordsOpening TradeFoot-Loose CapitalR &D GrowthScale EffectsRegional InequalityLocal and International Spillovers
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