Liansheng Wang (University of Copenhagen, Institute of Economics)
Abstract
We study the sources of long-run growth and wage gap in a North-South (N-S) model with trade and foreign direct investment (FDI). Although R&D is the engine of global growth, increased share of R&D spending need not be accompanied by higher growth rate, and vice versa. Although, investment is induced by productivity growth, investment-output ratio need not rise monotonically with productivity growth. Lower investment-output ratio may accompany higher productivity growth, so higher growth rate need not entail lower share of consumption. We argue that existing models may exaggerate or under-estimate the role of R&D in growth. We also show that higher growth rate is normally accompanied by greater N–S wage gap in the long run. The effect of country size on wage gap is generally ambiguous, depending on the direction and magnitude of scale effects in R&D. Both FDI and S-N migration may increase global growth rate and N-S wage gap.
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Publisher Info
Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number
00-12.
Length: 28 pages Date of creation: Oct 2000 Date of revision: Handle: RePEc:kud:kuiedp:0012
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Find related papers by JEL classification: O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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