ABSTRACT
This chapter attempts to study the dynamics of comparative advantage within an economy stemming from endogenous innovation and examines the effects of trade and research and development policies, on these dynamics. It explores the engines for changes in the dynamics of comparative advantage are the “advantage of economic backwardness” and the “advantage of economic forwardness”. The chapter discusses the dynamics of comparative advantage within an economy by incorporating the “advantage of backwardness” and the “advantage of forwardness”, the relative strength of which is assumed to depend upon the technological distance from a marginal sector in the economy. If the level of the marginal sector is high enough, cyclic repetition of comparative advantage is more likely to arise, such that comparative disadvantage becomes a source of comparative advantage, due to the advantage of backwardness. According to Nathan Rosenberg, the process of industrialization in the US is characterized by “technological convergence” mediated by the US machine tool industry.
