Intra-National Trade as Channels of Spillovers in Developing Countries

Intra-National Trade as Channels of Spillovers in Developing Countries

We developed a model to explore the comparative advantage based intra-national trade in developing countries, as a contrast to models driven by increasing returns and agglomeration that prevail in the developed world. The model incorporates technological spillovers and trade. The findings suggest that the intra-national trade share of a region is inversely proportional to its technological level, and that economic growth diffuses along the intra-national trade network from the developed country, through the advanced regions of the developing country, into its less developed regions. Internal trade costs exert a multiplied hindering effect, stronger than that of border barriers, on national growth. The statistics derived from China`s 2007 provincial input-output tables provide evidence in favor of the main theoretical findings.