A Flying Geese Theory of Industrial Development

Abstract

We develope a flying geese theory of North-South trade in which production location alternates between North and South as Northern quality-upgrading R&D and Southern catching-up R&D alternately become successful. Each variety of the good is born in North and continue to be produced in North until it becomes obsolete. The location of the dominant firms of the industry, however, shifts back and forth between North and South, as geese take turns to be the lead goose in the formation of flying geese.