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on Technology and Industrial Dynamics |
| By: | Aida Caldera |
| Abstract: | This paper investigates the relationship between innovation and the export behavior of firms using data from a representative panel of Spanish firms over 1991-2002. It presents a simple theoretical model of the firm decision to export and innovate that guides the econometric analysis. Consistent with the predictions of the theoretical model, the econometric results suggest a positive effect of firm innovation on the probability of participation in export markets. The results further reveal the heterogeneous effects of different types of innovations on the firm export participation. In particular, product upgrading appears to have a larger effect on the firm export participation than the introduction of cost-saving innovations. These findings are robust to alternative regression techniques to control for firm unobserved heterogeneity, to dynamic specifications and to the use of instrumental variables regressions to control for the potential endogeneity between innovation and exporting. |
| Keywords: | Firm data, innovation, trade. |
| JEL: | F10 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2009_014&r=tid |
| By: | Desmet, Klaus; Parente, Stephen |
| Abstract: | This paper argues that an economy's transition from Malthusian stagnation to modern growth requires markets to reach a critical size, and competition to reach a critical level of intensity. By allowing an economy to produce a greater variety of goods, a larger market makes goods more substitutable, raising the price elasticity of demand, and lowering mark-ups. Firms must then become larger to break even, which facilitates amortizing the fixed costs of innovation. We demonstrate our theory in a dynamic general equilibrium model calibrated to England's long-run development and explore how various factors affect the timing of takeoff. |
| Keywords: | Competition; Industrial Revolution; Innovation; Market Revolution; Unified Growth Theory |
| JEL: | N33 O14 O33 O41 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7290&r=tid |