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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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    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. Alan V. Deardorff, 2003. "What Might Globalisation's Critics Believe?," The World Economy, Wiley Blackwell, vol. 26(5), pages 639-658, 05.
    2. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," World Bank Economic Review, World Bank Group, vol. 22(2), pages 187-231, June.
    3. Chol-Won Li, 2003. "Endogenous Growth Without Scale Effects: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 1009-1017, June.
    4. Segerstrom, Paul, 2003. "Naomi Klein and the Anti-Globalization Movement," CEPR Discussion Papers 4141, C.E.P.R. Discussion Papers.
    5. Arnold, Lutz G., 2003. "Growth in stages," Structural Change and Economic Dynamics, Elsevier, vol. 14(1), pages 55-74, March.
    6. 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.
    7. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    8. Agell, Jonas, 2001. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," Research Papers in Economics 2001:12, Stockholm University, Department of Economics.
    9. Chui, Michael & Currie, David & Levine, Paul L & Pearlman, Joseph, 1996. "Phases of Imitation and Innovation in a North-South Endogenous Growth Model," CEPR Discussion Papers 1489, C.E.P.R. Discussion Papers.
    10. 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.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    12. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
    13. Paul Segerstrom & Elias Dinopoulos, 2004. "A Theory of North-South Trade and Globalization," 2004 Meeting Papers 30, Society for Economic Dynamics.
    14. 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.
    15. Li, Chol-Won, 2001. "On the Policy Implications of Endogenous Technological Progress," Economic Journal, Royal Economic Society, vol. 111(471), pages C164-79, May.
    16. Dinopoulos, Elias & Thompson, Peter, 1998. " Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
    17. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
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