%A Jiandong Ju,Xuebing Yang %T The Cosine-Shaped Pattern of Innovations and Technological Advantages: Theory and Evidence %0 Journal Article %D 2013 %J Front. Econ. China %J Frontiers of Economics in China %@ 1673-3444 %R 10.3868/s060-002-013-0024-8 %P 476-489 %V 8 %N 4 %U {https://journal.hep.com.cn/fec/EN/10.3868/s060-002-013-0024-8 %8 2013-12-05 %X

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.