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Modelling International Economic Integration: Patterns of Catching-up, Foreign Direct Investment and Migration Flows

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  • Michael Landesmann

    ()
    (The Vienna Institute for International Economic Studies, wiiw)

  • Robert Stehrer

    ()
    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

This paper develops a Schumpeterian model of international specialization and catching-up. In a previous version of the model we looked at the impact on international trade specialization when different patterns of technological catching-up are followed. One of these is a Gerschenkron pattern at the industrial level, where the largest initial gaps in productivity give rise to the fastest relative productivity growth rates. Depending on the productivity, wage and profits dynamic there can be 'comparative advantage switchovers' in which a catching-up economy turns its competitive advantage towards medium- to high-tech areas. In this paper we follow up the impact of the unit profit or 'rent' patterns on foreign direct investment and through that on the speed of technology transfer and hence on differential productivity growth. We show that labour market dynamics, productivity catching-up and investment patterns all combine to determine the evolution of the international division of labour. We point also to the impact on labour demand and wage structures (between skilled and unskilled workers) both in the lead and the catching-up economies. The model thus contributes to the literature on globalization and labour markets.

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Bibliographic Info

Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Working Papers with number 27.

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Date of creation: Mar 2004
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Publication status: Published as wiiw Working Paper
Handle: RePEc:wii:wpaper:27

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Related research

Keywords: international integration; foreign direct investment; endogenous productivity growth; trade and employment; migration;

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Cited by:
  1. Landesmann, M.A. & Stehrer, R., 2006. "Goodwin's structural economic dynamics: Modelling Schumpeterian and Keynesian insights," Structural Change and Economic Dynamics, Elsevier, vol. 17(4), pages 501-524, December.
  2. Sami Ben Mim (ERUDITE) & Fatma Mabrouk (GREThA, CNRS, UMR 5113), 2011. "Remittances and economic growth: what channels of transmission? (In French)," Cahiers du GREThA 2011-28, Groupe de Recherche en Economie Théorique et Appliquée.

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