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Globalization, Labor Market Rigidities and Multiple Equilibria

  • Wolf-Heimo GRIEBEN
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    This paper analyses the effects of globalization, stricter intellectual property rights protection and different labor market policies in a dynamic North-South general equilibrium model with non-scale growth. To this aim, we generalize the Schumpeterian product-lifecycle model of Dinopoulos and Segerstrtom (2003) by adding frictional unemployment and firing costs to their framework. We find that the effects on North-South wage inequality, employment and growth depend qualitatively on the level of Northern firing costs. Contrary to the special case of perfect labor market flexibility studied by Dinopoulos and Segerstrom, globalization may not benefit anymore both the South in terms of a relative-wage catch up and the North in terms of a temporary innovation and growth push.

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    File URL: http://degit.sam.sdu.dk/papers/degit_09/C009_020.pdf
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    Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_020.

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    Length: 33 pages
    Date of creation: Jun 2004
    Date of revision:
    Handle: RePEc:deg:conpap:c009_020
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    1. Arnold, Lutz G., 2002. "On the growth effects of North-South trade: the role of labor market flexibility," Journal of International Economics, Elsevier, vol. 58(2), pages 451-466, December.
    2. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
    3. Jonas Agell, 2002. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," German Economic Review, Verein für Socialpolitik, vol. 3(2), pages 107-135, 05.
    4. Currie, David, et al, 1999. "Phases of Imitation and Innovation in a North-South Endogenous Growth Model," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 60-88, January.
    5. Arnold, Lutz G., 2003. "Growth in stages," Structural Change and Economic Dynamics, Elsevier, vol. 14(1), pages 55-74, March.
    6. Alan V. Deardorff, 2002. "What Might Globalization's Critics Believe?," Working Papers 492, Research Seminar in International Economics, University of Michigan.
    7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    8. Paul Segerstrom & Elias Dinopoulos, 2004. "A Theory of North-South Trade and Globalization," 2004 Meeting Papers 30, Society for Economic Dynamics.
    9. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
    10. Mauro, Luciano & Carmeci, Gaetano, 2003. "Long run growth and investment in education: Does unemployment matter?," Journal of Macroeconomics, Elsevier, vol. 25(1), pages 123-137, March.
    11. Li, Chol-Won, 2001. "On the Policy Implications of Endogenous Technological Progress," Economic Journal, Royal Economic Society, vol. 111(471), pages C164-79, May.
    12. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    13. Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
    14. Chol-Won Li, 2003. "Endogenous Growth Without Scale Effects: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 1009-1017, June.
    15. Dinopoulos, Elias & Thompson, Peter, 1998. " Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
    16. Segerstrom, Paul, 2003. "Naomi Klein and the Anti-Globalization Movement," CEPR Discussion Papers 4141, C.E.P.R. Discussion Papers.
    17. Lutz G. Arnold, 2002. "On the Effectiveness of Growth-Enhancing Policies in a Model of Growth Without Scale Effects," German Economic Review, Verein für Socialpolitik, vol. 3(3), pages 339-346, 08.
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