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The international product cycle and globalization of production

This paper develops a growth model aimed at understanding the potential effects of globalization of production on rate of innovation, distribution of skilled labor income between the North and South, and welfare of skilled workers in both regions. We adopt a dynamic general equilibrium product-cycle model, assuming that the North specializes in innovation and the South specializes in imitation. Globalization of production resulting from trade liberalization and imitation of the North's technology by the South increases the rate of innovation. In the initial stage of globalization of production, deeper globalization unambiguously improves the welfare of skilled labor in the North, though welfare of Southern skilled labor may still increase. In the later stage, deeper globalization of production unambiguously improves the welfare of skilled labor in the South, though welfare of Northern skilled labor may still improve.

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File URL: http://www.dallasfed.org/assets/documents/research/staff/staff0803.pdf
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Article provided by Federal Reserve Bank of Dallas in its journal Staff Papers.

Volume (Year): (2008)
Issue (Month): May ()
Pages:

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Handle: RePEc:fip:feddst:y:2008:i:may:n:5
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  1. Grossman, G.M. & Helpman, E., 1989. "Quality Ladders And Product Cycles," Papers 152, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December.
  3. Dollar, David, 1986. "Technological Innovations, Capital Mobility, and the Product Cycle inNorth-South Trade," American Economic Review, American Economic Association, vol. 76(1), pages 177-90, March.
  4. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-66, April.
  5. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  6. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
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