ABSTRACT
This chapter analyses the international technological-knowledge diffusion from developed to developing countries. The analysis is based on a dynamic general equilibrium model, in which endogenous growth is driven by R&D, and where two countries are considered: an innovative country and an imitator country. The analysis is done by considering three productive sectors: final goods production, intermediate goods production and R&D activities. The aggregate final good and designs arising from successful R&D activities are used in the production of intermediate goods, under monopolistic competition. The aggregate final good is also used to produce designs in the R&D sector, but here under perfect competition. The chapter also analyses the transitional dynamics of the technological-knowledge diffusion model by solving the model numerically. It presents the MATLAB/Octave solver function ode45 for nonstiff differential equations, and numerical methods to tackle stiff initial value problems.
