International Trade and Innovation

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Abstract

We provide a review of the recent literature – both theoretical and empirical – analyzing the multi-dimensional connections between globalization and innovation. We develop a model that features many of those mechanisms that connect trade and innovation. It features the joint selection of firms into innovation and international market participation (in our model, we restrict that participation to exports). Our model also highlights how exposure to international markets affects the incentives for innovation. ✩ We thank Sina Ates, Elhanan Helpman, Ezra Oberfield