Defensive innovations in developed countries can explain the empirical phenomenon that openness towards trade with less-developed countries does not necessarily induce a substantial increase in the wage differential and trade volumes. Building on step-by-step innovations as introduced by Aghion...

The importance of innovation for the economic performance of industrialized countries has been largely stressed recently by the theoretical and empirical literature. Moreover the intensity of knowledge externalities in generating innovation, is the key parameter in determining sustained growth...