Data And code for: "Knowledge Diffusion, Trade and Innovation across Countries and sectors"

This paper provides a unified framework for quantifying cross-country and cross-sector interactions among trade, innovation, and knowledge diffusion. This framework is used to study the effect of trade liberalization in an endogenous growth model with comparative advantage and the stock of knowledge determined by innovation and diffusion. The model is calibrated to match observed cross-country and cross-sector heterogeneity in production, innovation and knowledge spillovers. The counterfactual analysis shows that a reduction in trade costs induces a re-allocation of R&D and comparative advantage across sectors. Heterogeneous knowledge diffusion amplifies specialization effects of trade-induced R&D re-allocation, becoming an important source of welfare.