This paper provides empirical evidence on the contributions of interindustry and interstate knowledge spillovers to the output and growth of state manufacturing industries. The work develops a method for detecting spillovers within the output equations of the Heckscher-Ohlin trade model. This method shows how knowledge spillovers can reverse the Heckscher-Ohlin patterns of comparative advantage. The findings indicate that knowledge spillovers across states are strong enough to reverse comparative advantage; however, knowledge spillovers across industries are not strong enough to reverse comparative advantage. The interstate knowledge spillovers are geographically localized and contribute substantially to state output and growth in manufactures.
- Knowledge spillovers; comparative advantage; growth; patents; states