Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74278
Authors: 
Valente, Simone
Year of Publication: 
2005
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 140.2005
Abstract: 
This paper extends the ’expanding-varieties’ growth model in a two-countries-two-goods setup, and describes the dynamics of growth rates and terms of trade when the industry-based economy is the innovation leader, while the tourism-based economy is the follower (i.e. increases the number of intermediate inputs by readapting innovations developed abroad). Two types of transitional dynamics may exist: technological catching-up and technological falling-behind. Contrary to the standard result, technological catching-up by the follower is associated with lower growth rates with respect to the leader, whereas terms-of-trade effects guarantee positive growth differentials for the tourism-based economy when the technological gap with the leader increases over time. The underlying principle of ’increased relative demand’ might explain the good economic performance observed in tourism-dependent economies.
Subjects: 
Endogenous growth
Two-country models
Technology diffusion
Trade specialization
JEL: 
F12
F43
O33
Document Type: 
Working Paper

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