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

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  • Thoenig, Mathias
  • Verdier, Thierry

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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Bibliographic Info

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

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Cited by:
  1. Paulo Bastos & Odd Rune Straume, 2010. "Globalization, Product Differentiation and Wage Inequality," IDB Publications 6867, Inter-American Development Bank.
  2. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170 Elsevier.
  3. Koeniger, Winfried, 2002. "Defensive Innovations," IZA Discussion Papers 454, Institute for the Study of Labor (IZA).
  4. J Peter Neary, 2001. "Foreign Competition and Wage Inequality," Working Papers 200102, School Of Economics, University College Dublin.
  5. Patrick Artus, 2006. "Intégration commerciale avec des pays émergents ayant des ressources importantes en main-d'œuvre qualifiée. Quels effets pour les pays européens ?," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 673-704.
  6. J. Peter Neary, 2000. "Competition, Trade and Wages," Working Papers 200020, School Of Economics, University College Dublin.
  7. 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.
  8. Thoenig, Mathias & Verdier, Thierry, 2002. "A Theory of Defensive Skill-based Innovation and Globalization," CEPR Discussion Papers 3416, C.E.P.R. Discussion Papers.
  9. Koeniger, Winfried, 2001. "Trade, Labor Market Rigidities, and Government-Financed Technological Change," IZA Discussion Papers 241, Institute for the Study of Labor (IZA).

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