School of Economics

2002 Discussion Papers

School of Economics Discussion Paper 02/06
July 2002

Exports, Product Differentiation and Knowledge Spillovers
Miguel León-Ledesma

School of Economics
University of Kent at Canterbury

Abstract

Empirical studies on aggregate export behaviour have recently emphasised the role played by innovation as the main force driving product differentiation and competitiveness for developed countries. These studies treat foreign innovation as a variable that affects negatively national export shares. We incorporate the impact of foreign innovation in a standard new trade theory model and find that, if knowledge spillovers exist, foreign knowledge accumulation could even have a positive effect on national exports. We then test the model using aggregate export data for a set of 21 OECD economies and find that the foreign stock of knowledge affects exports positively for the less advanced countries in the sample and has no impact on exports for the G7 economies.

JEL Classification: F12, O31, C22, C23

Keywords: knowledge spillovers, product differentiation, export functions, panel cointegration

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