Technological Leaders and Followers in a World Economy

This paper develops a dynamic general equilibrium model of North-South trade and economic growth in a world economy with a continuum of countries. Countries are different in research productivity. Innovation, imitation and the relative wage between countries are endogenously determined as well as the number of the country that specialize in innovative or imitative R&D. We investigate how equilibrium is affected by globalization, intellectual property right protection, industrial policy, competition and migration. The model is also extended to introduce foreign direct investment.