Trade Induced Technical Bias and Wage Inequalities: A Theory of Defensive Innovation
AbstractThis 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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Date of creation: 01 Aug 2000
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- Thoenig, Mathias & Verdier, Thierry, 2000. "Trade Induced Technical Bias And Wage Inequalities: A Theory Of Defensive Innovations," CEPR Discussion Papers 2401, C.E.P.R. Discussion Papers.
- Thoenig, M. & Verdier, T., 2000. "Trade Induced Technical Bias and Wage Inequalities: a Theory of Defensive Innovation," DELTA Working Papers 2000-02, DELTA (Ecole normale supérieure).
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
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