Grossman & Helpman 1993

Grossman G. and Helpman E. 1993. Innovation and Growth in the Global Economy (MIT Press, Cambridge).

[A] country that interacts with the outside world may gain access to the large body of knowledge that has already been accumulated in the interna- tional research community, as well as to some of the new discoveries that are being made there. [...] If the residents of a country meet and interact with foreign counterparts, they may find occasions to learn technical information that contributes to their country's stock of general knowledge. These oppor- tunities might never arise if the country opts for economic isolation (p. 166). It is plausible to suppose that the foreign contribution to the local knowledge stock increases with the number of commercial interactions between domestic and foreign agents. [...] It seems reasonable to assume therefore that the extent of the spillovers between any two countries increases with the volume of their bilateral trade (pp. 166–167). Before the cumulative volume of trade becomes trivial in comparison to the number of available varieties, apolicy that expands trade (e.g., anexport subsidy or an import subsidy) encourages knowledge acquisition from abroad, while policies that contract trade reduce interational knowledge spillovers. The former type of policy accelerates growth along the transition path, while the latter type slows transitional growth (p. 168).