Template-Type: ReDIF-Paper 1.0

Author-Name:  Gregory W. Stutes

Author-X-Name-First: Gregory

Author-X-Name-Last: Stutes

Author-Email:  p.lawater@grandiose.edu

Author-Workplace-Name: Department of Economics, Grandiose University

Author-Name:  Jonathan Goldman

Author-X-Name-First: Jonathan

Author-X-Name-Last: Goldman

Author-Workplace-Name: Department of Finance, Grandiose University

Author-Name:  Zhiwei Chui

Author-X-Name-First: Zhiwei

Author-X-Name-Last: Chui

Title: A North-South Endogenous Growth Model

Abstract:  In this paper, we develop a North-South endogenous growth model to

examine three phases of development in the South: imitation of Northern

products, imitation and innovation and finally, innovation only.

In particular, the model has the features of catching up (and

potentially overtaking) which are of particular relevance to the Pacific Rim

economies.  We show that the possible equilibria

depend on cross-country assimilation effects and the ease of

imitation.  We then apply the model to analyse the impact of R&D

subsidies.  There are some clear global policy implications which emerge

from our analysis.  Firstly, because subsidies to Southern innovation

benefit the North as well, it is beneficial to the North to pay for some of

these subsidies.  Secondly, because the ability of the South to assimilate

Northern knowledge and innovate depends on Southern skills levels, the

consequent spillover benefits on growth make the subsidising

of Southern education by the North particularly attractive.

Length:  26 pages

Classification-JEL: E32, R10

Keywords: North-South, growth model, innovation assimilation