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A Theory of Defensive Skill-based Innovation and Globalization

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Abstract

This Paper considers a dynamic model of innovations in which firms can endogenously bias the direction of technological change. Both in a North-North and North-South context, we show that, when globalization triggers an increased threat of technological leapfrogging or imitation, firms tend to respond to that threat by biasing the direction of their innovations towards skilled labour-intensive technologies. We show that this process of defensive skill biased innovations generates an increase in wage inequalities in both regions. We then discuss suggestive empirical evidence of the existence of defensive skill biased technical change.

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  • Verdier, Thierry, 2002. "A Theory of Defensive Skill-based Innovation and Globalization," CEPR Discussion Papers 3416, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3416
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    More about this item

    Keywords

    Trade integration; Technical change; Skill bias; Defensive innovation;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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