The effects of autocatalytic trade cycles on economic growth

Abstract

This paper shows that autocatalytic trade cycles can be a positive feedback system for innovation and thus for economic growth. Using United Nations data, a trade network is proposed and a set of variables that represent the participation of countries in autocatalytic trade cycles is constructed. A clear relationship between these variables and economic growth is found since more innovation is produced in countries that are part of trade cycles. However, the relationship changes with autocatalytic trade cycle sizes, categories of goods and time scales. Moreover, autocatalytic trade cycles also have a positive effect for the trade flows involved, although this effect differs significantly depending on the size of the cycles. This new approach based on autocatalytic trade cycles emphasizes the benefits that countries can extract from trade cycles and points out the need of policies that foster these benefits. These conclusions strengthen existing literature, and also add new insights to innovation policy and the pursuit of economic prosperity.

Keywords:

• R&D
• innovation
• technological knowledge
• economic growth
• autocatalytic trade cycles
• international trade
• policy

JEL Classification:

• C3
• F1
• O3

Additional information

Notes on contributors

Jurriën J. Bakker

Jurriën J. BAKKER (25) has obtained a Bsc in Applied Physics and a Msc in Innovation Sciences at Eindhoven University of Technology. He has completed an Erasmus semester in Business and Innovation at the Faculty of Economics, University of Porto. He is currently a PhD student at the faculty of applied economics Catholic University of Leuven.

Oscar Afonso

Oscar AFONSO (44) has obtained MA and PhD degrees in Economics from the University of Porto. He is Assistant Professor at Faculty of Economics, University of Porto, and researcher at CEFUP (Center in Economics and Finance), OBEGEF (Observatory in Economics and Management of Fraud) and NIFIP. He has published a book, book chapters and articles in Acta Oeconomica, Advances in Management and Applied Economics, Applied Economics, Applied Economics Letters, Economic Modelling, Economics Letters, Ekonomiaz, Economics Research International, Energy Journal, European Research Studies Journal, Intereconomics, International Economic Journal, International Trade Journal, Japanese Economic Review, Journal of Business Economics and Management, Journal of International Trade and Economic Development, Macroeconomic Dynamics, Manchester School, Metroeconomica, Open Business Journal and Review of World Economics. He has been teaching Computational Economics (Doctoral Program in Economics), Economic growth (Master and Doctoral Program in Economics), Macroeconomics (Undergraduate Economics) and International trade (Undergraduate Economics).

Sandra T. Silva

Sandra T. SILVA (39) is Assistant Professor at Faculty of Economics, Porto University (FEP) and researcher at CEFUP (Center in Economics and Finance). She holds a MA and a PhD, both in Economics, from FEP. She has published a pedagogic book on macroeconomics, some book chapters and articles related with evolutionary economics, innovation and economic growth, published in international journals such as Journal of Evolutionary Economics, Journal of Economic Interaction and Coordination, Evolutionary and Institutional Economics Review, Organisational Transformation and Social Change. Current research interests are on evolutionary economics, innovation, economic growth, poverty and inequality. She has been teaching several courses at FEP, for example, Macro-economics (Undergraduate Economics, Master in Economics and Doctoral Programme in Economics), Economic Growth (Undergraduate Economics), and Theories and Systems of Innovation (Master in Innovation Economics and Management).