A Theory of North-South Trade and Globalization
AbstractThis Paper develops a dynamic general equilibrium model of North-South trade with scale-invariant growth. Northern firms devote resources to innovative R&D to discover higher quality products and Southern firms devote resources to imitative R&D to copy state-of-the-art quality Northern products. Both innovation and imitation rates are endogenously determined as well as the degree of wage inequality between Northern and Southern workers. The steady-state effects of globalization and stronger protection of intellectual property are analysed. It is shown that globalization leads to more copying of Northern products, faster technological change, and less wage inequality between Northern and Southern workers. Stronger intellectual property protection has the opposite steady-state effects and thus serves to moderate the effects of globalization.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4140.
Date of creation: Dec 2003
Date of revision:
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Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
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Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-DEV-2004-02-29 (Development)
- NEP-DGE-2004-02-29 (Dynamic General Equilibrium)
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