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Frontiers of Economics in China

Front. Econ. China    2013, Vol. 8 Issue (4) : 476-489     DOI: 10.3868/s060-002-013-0024-8
Orginal Article |
The Cosine-Shaped Pattern of Innovations and Technological Advantages: Theory and Evidence
Jiandong Ju1(),Xuebing Yang2()
1. Center for International Economic Research, School of Economics and Management, Tsinghua University, Beijing 100084, China Department of Economics, University of Oklahoma, Norman, OK 73019, USA
2. Division of Business and Engineering, Pennsylvania State University at Altoona, Altoona, PA 16601, USA
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Using data from 24 OECD countries, we find that the relationship between a country’s R&D investment and technological advantage in a sector (measured by the country’s labor productivity of the sector relative to the rest of the world) is non-monotonic. In particular, for countries whose technology levels are much lower or higher than the rest of the world in a sector, their sectoral R&D investment declines as their advantages in the sector improve; for counties with middle technology levels, the opposite is true. Extending the Eaton and Kortum framework, we develop a static model to theoretically analyze the relationship between R&D investment and technological advantages. We show that when the research efficiency in a sector is sufficiently elastic with respect to the sectoral technological advantage, a country’s R&D investment increases with its technological advantage, and vice versa.

Keywords R&D patterns      trade      technological advantage     
Issue Date: 05 December 2013
 Cite this article:   
Jiandong Ju,Xuebing Yang. The Cosine-Shaped Pattern of Innovations and Technological Advantages: Theory and Evidence[J]. Front. Econ. China, 2013, 8(4): 476-489.
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