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Endogenous Income Distribution with Product Obsolescence

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  • Lee, Seong-Hoon
  • Goo, Young-Wan
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    Abstract

    Wage inequality in U. S. and UK has increased over the past 25 years. Paradoxically, skilled labor supply has also increased in both countries. This paper develops the dynamic general equilibrium model of product innovation with product obsolescence. We develop a model to provide an explanation of inequality phenomena between skilled and unskilled labor by the channel of innovation and market structure. This paper builds on the dynamic general equilibrium model of product innovation and incorporates overhead cost of the production of intermediate goods to capture endogenous growth rate of innovation, hazard rate, product life cycle and inequality.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/16522/1/HJeco0490200750.pdf
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    Bibliographic Info

    Article provided by Hitotsubashi University in its journal Hitotsubashi Journal of Economics.

    Volume (Year): 49 (2008)
    Issue (Month): 2 (December)
    Pages: 75-90

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    Handle: RePEc:hit:hitjec:v:49:y:2008:i:2:p:75-90

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    Related research

    Keywords: wage inequality; skilled and unskilled labor; product innovation; general equilibrium;

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    1. Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers 92-08, Rochester, Business - Financial Research and Policy Studies.
    2. Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers 1413, C.E.P.R. Discussion Papers.
    3. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    4. Matthew Higgins & Jeffrey G. Williamson, 1999. "Explaining Inequality the World Round: Cohort Size, Kuznets Curves, andOpenness," NBER Working Papers 7224, National Bureau of Economic Research, Inc.
    5. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-66, April.
    6. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
    7. Grossman, Gene M & Helpman, Elhanan, 1991. "Endogenous Product Cycles," Economic Journal, Royal Economic Society, vol. 101(408), pages 1214-29, September.
    8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
    9. Segerstrom, Paul S, 1991. "Innovation, Imitation, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 807-27, August.
    10. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
    11. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-47, April.
    12. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August.
    13. Bourguignon, Francois & Morrisson, Christian, 1998. "Inequality and development: the role of dualism," Journal of Development Economics, Elsevier, vol. 57(2), pages 233-257.
    14. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-46, December.
    15. Gene M. Grossman & Elhanan Helpman, 1989. "Comparative Advantage and Long-Run Growth," NBER Working Papers 2809, National Bureau of Economic Research, Inc.
    16. Lai, Edwin L-C, 1998. " Schumpeterian Growth with Gradual Product Obsolescence," Journal of Economic Growth, Springer, vol. 3(1), pages 81-103, March.
    17. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    18. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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