The Effects of Opening Trade on Regional Inequality in a Model of Scale-Invariant Growth and Foot-Loose Capital

Katsufumi Fukuda

Graduate School of Economics, Kobe University, Kobe, Japan.

DOI: 10.4236/tel.[phone]                

Abstract

We consider a semi endogenous R & D growth model with international trade, foot-loose capital, and local and international knowledge spillovers in a closed economy and also international knowledge spillovers in an open economy. We show that by opening trade two regions diverge (converge) with (not) sufficiently high intertemporal knowledge spillover in the R & D sector and elasticity of substitution between modern goods, and not sufficiently high (sufficiently high) richer country A’s share of firm owned.

Keywords

Opening Trade; Foot-Loose Capital; R & D Growth; Scale Effects; Regional Inequality; Local and International Spillovers

Conflicts of Interest

The authors declare no conflicts of interest.

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