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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. Boyan Jovanovic & Glenn MacDonald, 1993. "The Life-Cycle of a Competitive Industry," NBER Working Papers 4441, National Bureau of Economic Research, Inc.
    2. Bourguignon, F. & Morrisson, C., 1995. "Inequality and Development: The Role of Dualism," DELTA Working Papers 95-32, DELTA (Ecole normale supérieure).
    3. Galor, O. & Tsiddon, D., 1996. "Technological Progress, Mobility and Economic Growth," Papers 13-96, Tel Aviv.
    4. Matthew Higgins & Jeffrey G. Williamson, 1999. "Explaining inequality the world round: cohort size, Kuznets curves, and openness," Staff Reports 79, Federal Reserve Bank of New York.
    5. Lai, Edwin L-C, 1998. " Schumpeterian Growth with Gradual Product Obsolescence," Journal of Economic Growth, Springer, vol. 3(1), pages 81-103, March.
    6. Grossman, G.M. & Helpman, E., 1988. "Comparative Advantage And Long-Run Growth," Papers 39-88, Tel Aviv.
    7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    8. Boyan Jovanovic & Glenn MacDonald, 1993. "Competitive Diffusion," NBER Working Papers 4463, National Bureau of Economic Research, Inc.
    9. Gene M. Grossman & Elhanan Helpman, 1989. "Endogenous Product Cycles," NBER Working Papers 2913, National Bureau of Economic Research, Inc.
    10. Segerstrom, Paul S, 1991. "Innovation, Imitation, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 807-27, August.
    11. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
    12. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-46, December.
    13. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
    14. 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.
    15. 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.
    16. 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.
    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. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August.
    19. Macdonald, G.M., 1988. "Competitive Diffusion," University of Chicago - Economics Research Center 88-10, Chicago - Economics Research Center.
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