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Trade, product cycles, and inequality within and between countries

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  • Susan Chun Zhu

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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Bibliographic 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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Cited by:
  1. Ramezan Ali Marvi, 2014. "Technological Changes and Global Value Chains," Working Papers halshs-00999232, HAL.
  2. 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.
  3. David B. Audretsch & Mark Sanders, 2007. "Globalization and the Rise of the Entrepreneurial Economy," Jena Economic Research Papers 2007-003, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Sherif Khalifa & Evelina Mengova, 2010. "Offshoring And Wage Inequality In Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(3), pages 1-42, September.
  5. Pham, Cong S., 2008. "Product specialization in international trade: A further investigation," Journal of International Economics, Elsevier, vol. 75(1), pages 214-218, May.
  6. Ramezan Ali Marvi, 2014. "Technological Changes and Global Value Chains," AMSE Working Papers 1422, Aix-Marseille School of Economics, Marseille, France, revised 21 May 2014.
  7. Cong S. Pham & Mehmet A. Ulubaşoğlu, 2013. "The Role Of Endowments, Technology And Size In International Trade: New Evidence From Product-Level Data," Economics Series 2013_8, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  8. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  9. Zhu, Susan Chun, 2005. "Can product cycles explain skill upgrading?," Journal of International Economics, Elsevier, vol. 66(1), pages 131-155, May.
  10. Wang, Ming-cheng & Fang, Chen-ray & Huang, Li-hsuan, 2009. "International knowledge spillovers and wage inequality in developing countries," Economic Modelling, Elsevier, vol. 26(6), pages 1208-1214, November.

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