Growth, Trade, and Knowledge with National Research

In this chapter studies the effects of trade upon income distribution among nations in a globalizing world economy. Many studies demonstrate that productivity differences explain much of the variation in incomes across countries, and technology plays a key role in determining productivity. The purpose of this chapter is to study inequalities among nations with endogenous wealth accumulation and knowledge dynamics. This chapter deals with the effects of free trade and national governments’ research policies on global growth and inequalities among nations. This chapter follows the neoclassical growth trade model, particularly the Oniki-Uzawa model. It defines the multi-country model with capital accumulation and knowledge creation and 5.2 shows that the dynamics of the world economy with J countries can be described by (J + 1)-dimensional differential equations. It analyzes the effects of changes in the DE’s knowledge utilization efficiency, the DE’s tax rate, the UE’s tax rate, and the DE’s propensity to save.