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A Schumpeterian Model of Protection and Relative Wages

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  • Paul Segerstrom
  • Elias Dinopoulos

Abstract

This paper presents a dynamic general equilibrium model of R&D-based trade between two structurally identical countries in which both innovation and skill acquisition rates are endogenously determined. Trade liberalization increases R&D investment and the rate of technological change. It also reduces the relative wage of unskilled workers and results in skill upgrading within each industry when R&D is the skilled-labor intensive activity relative to manufacturing of final products. Time-series evidence from the United States and simulation analysis support the empirical relevance of the model, which offers a North-North trade explanation for increasing wage inequality.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.3.450
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 3 (June)
Pages: 450-472

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:3:p:450-472

Note: DOI: 10.1257/aer.89.3.450
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  1. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
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  3. repec:fth:coluec:761 is not listed on IDEAS
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  19. Hakura, D. & Deardorff, A.V., 1993. "Trade and Wages: What Are the Questions?," Working Papers 341, Research Seminar in International Economics, University of Michigan.
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