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A Theory of North-South Trade and Globalization

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  • Dinopoulos, Elias
  • Segerstrom, Paul

Abstract

This 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 Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4140.

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Date of creation: Dec 2003
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Handle: RePEc:cpr:ceprdp:4140

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Related research

Keywords: economic growth; globalization; intellectual property rights; north-south trade;

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References

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