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Trade Induced Technical Bias And Wage Inequalities: A Theory Of Defensive Innovations

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Thoenig, Mathias
Verdier, Thierry

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Abstract

This paper considers a dynamic North South model of international trade and innovations in which firms can endogenously bias the direction of technological change. We show that, when there is a differential degree of protection of property rights between the two regions, innovating firms face a trade-off between delocalization in the South and more secure property rights in the North. For a certain range of products, the optimal response to this tradeoff is the emergence of endogenous technological bias towards skilled labour technologies. We discuss the implications of this trade induced technological bias on the dynamics of international trade and relative wages in the two regions. For some configurations of parameters, the model is able to generate, along the transition path, an increase in wage inequalities in both regions and skill upgrading of southern production compatible with small changes in import penetration rates in North.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2401.

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Date of creation: Mar 2000
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Handle: RePEc:cpr:ceprdp:2401

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Related research
Keywords: Innovations; Technical Bias; Trade; Wage Inequalities;

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Find related papers by JEL classification:
D33 - Microeconomics - - Distribution - - - Factor Income Distribution
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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  1. J Peter Neary, 2001. "Foreign Competition and Wage Inequality," Working Papers 200102, School Of Economics, University College Dublin. [Downloadable!]
    Other versions:
  2. J. Peter Neary, 2000. "Competition, Trade and Wages," Working Papers 200020, School Of Economics, University College Dublin. [Downloadable!]
    Other versions:
  3. Maurin, Eric & Thesmar, David & Thoenig, Mathias, 2002. "Globalization and the demand for skill: An Export Based Channel," CEPR Discussion Papers 3406, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. J Peter Neary, 2002. "Globalisation and Market Structure," Working Papers 200220, School Of Economics, University College Dublin. [Downloadable!]
    Other versions:
  5. Mathias Thoenig & Thierry Verdier, 2003. "A Theory of Defensive Skill-Biased Innovation and Globalization," American Economic Review, American Economic Association, vol. 93(3), pages 709-728, June. [Downloadable!]
    Other versions:
  6. Koeniger, Winfried, 2001. "Trade, Labor Market Rigidities, and Government-Financed Technological Change," IZA Discussion Papers 241, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Koeniger, Winfried, 2002. "Defensive Innovations," IZA Discussion Papers 454, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Gino Gancia & Fabrizio Zilibotti, 2005. "Horizontal Innovation in the Theory of Growth and Development," Economics Working Papers 831, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
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