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A Schumpeterian North-South Growth Model of Trade and Wage Inequality

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  • Wolf-Heimo Grieben

Abstract

The paper presents a dynamic general-equilibrium model of interindustry North-South trade that is used to analyze the effects of trade liberalization on the Northern wage distribution. Both countries have a low-tech sector where consumer goods of constant quality are produced by use of unskilled labor. The North also has a high-tech sector that employs skilled labor and features a quality-ladder model structure with endogenous growth. Both innovation and skill acquisition rates are endogenously determined. In a balanced trade equilibrium, it is found that Southern-originated (Northern-originated) trade liberalization leads to an increase (decrease) in Northern wage inequality both between skilled and unskilled workers and within the group of skilled workers. The endogenous change in the Southern terms of trade determines the direction of change in unskilled wages in both the North and the South. Copyright Blackwell Publishing Ltd 2005..

Suggested Citation

  • Wolf-Heimo Grieben, 2005. "A Schumpeterian North-South Growth Model of Trade and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 106-128, February.
  • Handle: RePEc:bla:reviec:v:13:y:2005:i:1:p:106-128
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    References listed on IDEAS

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    1. Puhani, Patrick A., 2003. "A Test of the 'Krugman Hypothesis' for the United States, Britain, and Western Germany," ZEW Discussion Papers 03-18, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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    Cited by:

    1. Josh Hall, 2009. "Within and Across Country Inequality in a Model of Trade and Endogenous Growth," DEGIT Conference Papers c014_045, DEGIT, Dynamics, Economic Growth, and International Trade.
    2. Wolf-Heimo Grieben & Fuat Sener, 2009. "Labor Unions, Globalization, and Mercantilism," CESifo Working Paper Series 2889, CESifo Group Munich.
    3. Wolf-Heimo Grieben & Fuat Sener, 2012. "North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions?," Working Paper Series of the Department of Economics, University of Konstanz 2012-06, Department of Economics, University of Konstanz.
    4. Iwaisako, Tatsuro & Tanaka, Hitoshi & Futagami, Koichi, 2011. "A welfare analysis of global patent protection in a model with endogenous innovation and foreign direct investment," European Economic Review, Elsevier, vol. 55(8), pages 1137-1151.
    5. repec:eee:reecon:v:71:y:2017:i:3:p:564-587 is not listed on IDEAS
    6. Tanaka, Hitoshi & Iwaisako, Tatsuro, 2014. "Intellectual property rights and foreign direct investment: A welfare analysis," European Economic Review, Elsevier, vol. 67(C), pages 107-124.
    7. Grieben, Wolf-Heimo & Sener, Fuat, 2009. "Globalization, rent protection institutions, and going alone in freeing trade," European Economic Review, Elsevier, vol. 53(8), pages 1042-1065, November.
    8. Joshua D Hall, 2017. "Educational Quality Matters for Development: A Model of Trade, Inequality, and Endogenous Growth," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 128-154, January.

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