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North-South trade with increasing product variety

Author

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  • Gustafsson, Peter
  • Segerstrom, Paul

Abstract

We present a model of one-way product cycles in international trade. Firms develop new product varieties in technologically advanced countries (the North), other firms copy these products in less developed countries (the South) and all shifts in production go from North to South. What distinguishes this paper from the earlier literature are the model's implications for economic growth and wage determination. Economic growth is characterized by weak scale effects, in contrast to the strong scale effects in the earlier literature. The model can also account for large North-South wage differences for plausible parameter values.

Suggested Citation

  • Gustafsson, Peter & Segerstrom, Paul, 2010. "North-South trade with increasing product variety," Journal of Development Economics, Elsevier, vol. 92(2), pages 97-106, July.
  • Handle: RePEc:eee:deveco:v:92:y:2010:i:2:p:97-106
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    References listed on IDEAS

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    1. Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111 Elsevier.
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    11. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
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    Citations

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    Cited by:

    1. Iwaisako, Tatsuro & Tanaka, Hitoshi, 2017. "Product cycles and growth cycles," Journal of International Economics, Elsevier, vol. 105(C), pages 22-40.
    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. Cristobal Campoamor, Adolfo, 2015. "On Endogenous Product Cycles under Costly Trade," MPRA Paper 67289, University Library of Munich, Germany.
    7. Minniti, Antonio & Parello, Carmelo Pierpaolo, 2011. "Trade integration and regional disparity in a model of scale-invariant growth," Regional Science and Urban Economics, Elsevier, vol. 41(1), pages 20-31, January.
    8. Lorenczik, Christian & Newiak, Monique, 2012. "Imitation and innovation driven development under imperfect intellectual property rights," European Economic Review, Elsevier, vol. 56(7), pages 1361-1375.
    9. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    10. Dutta, Meghna & Kar, Saibal & Marjit, Sugata, 2013. "Product variety, finite changes and wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 610-613.
    11. Gangopadhyay, Kausik & Mondal, Debasis, 2012. "Does stronger protection of intellectual property stimulate innovation?," Economics Letters, Elsevier, vol. 116(1), pages 80-82.
    12. Wei-Bin Zhang, 2011. "Global Economic Growth, Elastic Labor Supply, Knowledge Utilization And Creation With Learning-By-Doing," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 58, pages 497-512, november.
    13. Finn Martensen, 2013. "Globalization, Unemployment, and Product Cycles: Short- and Long-Run Effects," Working Paper Series of the Department of Economics, University of Konstanz 2013-16, Department of Economics, University of Konstanz.
    14. Caselli, Mauro, 2013. "Credit constraints, inequality and the growth gains from trade," Economics Letters, Elsevier, vol. 121(1), pages 43-47.

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