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Trade, product cycles, and inequality within and between countries

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Author Info
Susan Chun Zhu

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Abstract

This paper incorporates Northern product innovation and product-cycle-driven technology transfer into the continuum-of-goods Heckscher-Ohlin model. The creation of very skill-intensive goods induces the North to transfer production of older, less skill-intensive goods to the South. These relocated goods are the most skill intensive by Southern standards. Hence, product cycles raise the relative demand for skilled workers and thus wage inequality within both regions. This runs contrary to the Stolper-Samuelson theorem, but accords well with the fact that wage inequality has risen in both Northern and Southern countries. Moreover, product cycles increase income inequality between countries.

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File URL: http://economics.ca/cgi/xms?jab=v37n4/11.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 37 (2004)
Issue (Month): 4 (November)
Pages: 1042-1060
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Handle: RePEc:cje:issued:v:37:y:2004:i:4:p:1042-1060

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Related research
Keywords:

Find related papers by JEL classification:
F1 - International Economics - - Trade

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. David B. Audretsch & Mark Sanders, 2008. "Globalization and the Rise of the Entrepreneurial Economy," Working Papers 08-21, Utrecht School of Economics. [Downloadable!]
  2. Cong S. Pham, 2007. "Product Specialization in International Trade: A Further Investigation," Economics Series 2007_14, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
    Other versions:
  3. Roberto Alvarez & Ricardo Lopez, 2008. "Skill Upgrading and the Real Exchange Rate," Caepr Working Papers 2008-020, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
    Other versions:
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