Applying new growth theory to int’l trade

Ideas, institutions, populations and human capital shape economic growth in the global knowledge economy. The objective of our research is to discuss the validity of this argument by Paul Romer when applied to different economic sectors and their various degrees of trade protection/integration on a theoretical and a practical basis. For this purpose we selected three emerging economies and investigate to what extent their national innovation policies facilitated the adoption of useful non-rival ideas through trade and investment. Based on these case studies, we will conduct a rough economic assessment of the welfare costs incurred by a country that cuts itself off from the global circulation of ideas in a particular economic sector due to unfavourable rules or lack of investment in facilities (local stock of technology) and human capital. For this purpose we will use Paul Romer’s new production function.