TY - JOUR
T1 - Innovation and production in the global economy
AU - Arkolakis, Costas
AU - Ramondo, Natalia
AU - Clare, Andrés Rodríguez
AU - Yeaple, Stephen
N1 - Funding Information:
*Arkolakis: Department of Economics, Yale University, 28 Hillhouse Avenue, New Haven, CT and NBER (email: costas.arkolakis@yale.edu); Ramondo: School of Global Policy and Strategy, University of California at San Diego, 9500 Gilman Drive, La Jolla, CA, and NBER (email: nramondo@ucsd.edu); Rodríguez-Clare: Department of Economics, University of California at Berkeley, 549 Evans Hall, Berkeley, CA, and NBER (email: andres@ econ.berkeley.edu); Yeaple: Department of Economics, Penn State University, 520 Kern Building, University Park, PA, and NBER (email: sry3@psu.edu). We thank Treb Allen, Vanessa Alviarez, Pol Antras, Ariel Burstein, Arnaud Costinot, Jonathan Eaton, Gene Grossman, Samuel Kortum, James Markusen, Eduardo Morales, Veronica Rappoport, Felix Tintelnot, and Jonathan Vogel, as well as seminar participants at several seminars and conferences for insightful comments. We also thank Fabian Eckert, Brian Greanway, Jakub Kominiarczuk, Xiangliang Li, Xiao Ma, and Masayuki Sawada for excellent research assistance. Rodríguez-Clare and Yeaple would like to thank the Human Capital Foundation, Rodríguez-Clare the Center for Equitable Growth, and Arkolakis the National Science Foundation for support. All remaining errors are our own. The statistical analysis of firm-level data on US multinational corporations reported in this study was conducted at the International Investment Division, US Bureau of Economic Analysis, under arrangements that maintained legal confidentiality requirements. Views expressed are those of the authors and do not necessarily reflect those of the Bureau of Economic Analysis. The authors declare that they have no relevant or material financial interests that relate to the research described in this paper.
Publisher Copyright:
© 2018 American Economic Association. All rights reserved.
PY - 2018/8
Y1 - 2018/8
N2 - We develop a quantifiable general equilibrium model of trade and multinational production (MP) in which countries can specialize in innovation or production. Home market effects or comparative advantage leads some countries to specialize in innovation and relegate manufacturing operations to other countries via outward MP. Counterfactual analysis reveals that the reduction in the cost of MP or the integration of China into the world economy may hurt countries that are driven to specialize in production, although these losses tend to be very small. Contrary to popular fears, production workers gain even in countries that further specialize in innovation. (JEL D58, F12, F14, F23, L60, O31).
AB - We develop a quantifiable general equilibrium model of trade and multinational production (MP) in which countries can specialize in innovation or production. Home market effects or comparative advantage leads some countries to specialize in innovation and relegate manufacturing operations to other countries via outward MP. Counterfactual analysis reveals that the reduction in the cost of MP or the integration of China into the world economy may hurt countries that are driven to specialize in production, although these losses tend to be very small. Contrary to popular fears, production workers gain even in countries that further specialize in innovation. (JEL D58, F12, F14, F23, L60, O31).
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U2 - 10.1257/aer.20141743
DO - 10.1257/aer.20141743
M3 - Review article
AN - SCOPUS:85050726679
SN - 0002-8282
VL - 108
SP - 2128
EP - 2173
JO - American Economic Review
JF - American Economic Review
IS - 8
ER -