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North-South trade with increasing product variety

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  • Gustafsson, Peter
  • Segerstrom, Paul

Abstract

We present a model of one-way product cycles in international trade. Firms develop new product varieties in technologically advanced countries (the North), other firms copy these products in less developed countries (the South) and all shifts in production go from North to South. What distinguishes this paper from the earlier literature are the model's implications for economic growth and wage determination. Economic growth is characterized by weak scale effects, in contrast to the strong scale effects in the earlier literature. The model can also account for large North-South wage differences for plausible parameter values.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 92 (2010)
Issue (Month): 2 (July)
Pages: 97-106

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Handle: RePEc:eee:deveco:v:92:y:2010:i:2:p:97-106

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Product cycles North-South trade Economic growth Intellectual property rights Trade costs;

References

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  1. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, vol. 55(1), pages 133-153, February.
  2. repec:ebl:ecbull:v:15:y:2003:i:4:p:1-8 is not listed on IDEAS
  3. Parello, Carmelo Pierpaolo, 2008. "A north-south model of intellectual property rights protection and skill accumulation," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 253-281, February.
  4. Grossman, Gene M & Helpman, Elhanan, 1991. "Endogenous Product Cycles," Economic Journal, Royal Economic Society, vol. 101(408), pages 1214-29, September.
  5. Glass, Amy Jocelyn & Saggi, Kamal, 2002. "Intellectual property rights and foreign direct investment," Journal of International Economics, Elsevier, vol. 56(2), pages 387-410, March.
  6. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  7. Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111 Elsevier.
  8. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  9. Grossman, G.M. & Helpman, E., 1989. "Quality Ladders And Product Cycles," Papers 152, Princeton, Woodrow Wilson School - Public and International Affairs.
  10. Francisco Alcalá & Antonio Ciccone, 2001. "Trade and productivity," Economics Working Papers 580, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2002.
  11. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
  12. Segerstrom, Paul S., 1999. "Intel Economics," Working Paper Series 524, Research Institute of Industrial Economics.
    • Paul S. Segerstrom, 2007. "Intel Economics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 247-280, 02.
  13. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  14. Keith E. Maskus, 2000. "Intellectual Property Rights in the Global Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 99, July.
  15. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
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Citations

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Cited by:
  1. Finn Martensen, 2013. "Globalization, Unemployment, and Product Cycles: Short- and Long-Run Effects," Working Paper Series of the Department of Economics, University of Konstanz 2013-16, Department of Economics, University of Konstanz.
  2. Wolf-Heimo Grieben & Fuat Sener, 2012. "North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions?," Working Paper Series of the Department of Economics, University of Konstanz 2012-06, Department of Economics, University of Konstanz.
  3. Christian Lorenczik & Monique Newiak, 2010. "Imitation and Innovation Driven Development under Imperfect Intellectual Property Rights," DEGIT Conference Papers c015_056, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Wolf-Heimo Grieben & Fuat Sener, 2009. "Labor Unions, Globalization, and Mercantilism," CESifo Working Paper Series 2889, CESifo Group Munich.
  5. Wei-Bin Zhang, 2011. "Global Economic Growth, Elastic Labor Supply, Knowledge Utilization And Creation With Learning-By-Doing," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 58, pages 497-512, november.
  6. Gangopadhyay, Kausik & Mondal, Debasis, 2012. "Does stronger protection of intellectual property stimulate innovation?," Economics Letters, Elsevier, vol. 116(1), pages 80-82.
  7. Minniti, Antonio & Parello, Carmelo Pierpaolo, 2011. "Trade integration and regional disparity in a model of scale-invariant growth," Regional Science and Urban Economics, Elsevier, vol. 41(1), pages 20-31, January.
  8. Caselli, Mauro, 2013. "Credit constraints, inequality and the growth gains from trade," Economics Letters, Elsevier, vol. 121(1), pages 43-47.
  9. Dutta, Meghna & Kar, Saibal & Marjit, Sugata, 2013. "Product variety, finite changes and wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 610-613.

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