Innovation Policy Essay Example | Topics and Well Written Essays - 2500 words

Innovation Policy - Essay Example Such countries have increased their focus on developing and enhancing technologies and this has helped in improving their profits. On the other side, there are countries that have developed export economies by utilising the technology that devised by importing countries. Policies of both these types of countries related to technological adaption have played a significant role in determining the international trade pattern. Role of technology in developing a pattern of trade had been formed with various other dimensions as well. In addition, the technological advancement has also received criticism for its role. Hence, the role of technology in trade policy is of immense importance not only for academic purpose but also from the perspective of an economist as well. Role of technology in trade is increasingly being considered as a game changing variable in international trade and economic scenario. Europe has enjoyed the benefits of technological development and it has dominated over t he years because of technological advancement. Europe at the moment is considering the other side of opportunities towards technological advancement as it is focusing on southern countries with import dependencies. Hence, the essay develops a review of literature on the role of technology in the international trade and economic environment. ... Krugman (1979a) has developed an equilibrium model that determines trade pattern as a result of technology adaption or improvement of countries. Krugman’s equilibrium model has two types of countries; north and south. Northern countries have been focussing on developing technological expertise that increases earnings per technological development and labour efficiency by not increasing the non-human input. Northern countries have also been focussing on developing new products and then export these products to southern countries with charging additional rentals or prices for innovation being offered. Referred countries with dominance on new product development also benefit with transportation-inn of movable capital that includes both increased foreign direct investment as well as skilled labour. Increased efficiency with technological advancement results in labour receiving higher wage rate despite of similar productivity rate as of southern side countries. On the other side ar e southern side countries, these countries focus on receiving technological advancement from developed (northern) countries. Southern countries focus on manufacturing old products and export them to north for meeting their demand. Hence, according to Krugman (1979a) technological developments determine the pattern of international trade. Apart from this north south model that determines the position of importer and exporter in international trade theory, Krugman (1979b) has also documented reason of trade between countries with similar technological position. Krugman (1979b) cites the reason for such trade i.e. trade between countries in north or south category as to be the economies of scale. Hence, adopting Chamberlinian approach for defining trade being