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Employment Protection, International Specialization, and Innovation

  • Saint-Paul, G.

We develop a model to analyse the implications of firing costs on incentives for R&D and international specialization. The Key idea is paying the firing cost, the country with a rigid labor market will tend to produce relatively secure goods, at a late stage of their product life cycle. Under international trade, an international product cycle emerges where, roughly, new goods are first produced in the low firing cost country will specialize in 'secondary innovations', that is, improvements in existing goods, while the low firing cost country will more specialize in 'primary innovation', that is, invention of new goods.

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Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 95-31.

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Length: 21 pages
Date of creation: 1995
Date of revision:
Publication status: Published in European Economic Review, 2002, vol. 46, no. 2, pp. 375-395
Handle: RePEc:del:abcdef:95-31
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  1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  2. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
  3. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
  4. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
  5. Cohen, D. & Saint-Paul, G., 1994. "Uneven Technical Progress and Job Destructions," DELTA Working Papers 94-10, DELTA (Ecole normale supérieure).
  6. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Bertola, Giuseppe, 1990. "Flexibility, Investment and Growth," CEPR Discussion Papers 422, C.E.P.R. Discussion Papers.
  8. Aghion, Philippe & Howitt, Peter, 1996. " Research and Development in the Growth Process," Journal of Economic Growth, Springer, vol. 1(1), pages 49-73, March.
  9. Saint-Paul, G., 1993. "Unemployment, Wage Rigidity, and the Returns to Education," DELTA Working Papers 93-11, DELTA (Ecole normale supérieure).
  10. Saint-Paul, G., 1992. "Are the Unemployed Unemployable," DELTA Working Papers 92-04, DELTA (Ecole normale supérieure).
  11. Saint-Paul, Gilles, 1996. "Unemployment and increasing private returns to human capital," Journal of Public Economics, Elsevier, vol. 61(1), pages 1-20, July.
  12. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  13. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
  14. Saint-Paul, Gilles, 1997. "Is labour rigidity harming Europe's competitiveness? The effect of job protection on the pattern of trade and welfare," European Economic Review, Elsevier, vol. 41(3-5), pages 499-506, April.
  15. Aghion, Philippe & Howitt, Peter, 1994. "Growth and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 477-94, July.
  16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  17. Boone, Jan, 2000. "Technological Progress, Downsizing and Unemployment," Economic Journal, Royal Economic Society, vol. 110(465), pages 581-600, July.
  18. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  19. C Bean & Christopher A. Pissarides, 1992. "Unemployment, Consumption and Growth," CEP Discussion Papers dp0100, Centre for Economic Performance, LSE.
  20. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
  21. Dale T Mortensen & Christopher Pissarides, 1995. "Technological progress," LSE Research Online Documents on Economics 2085, London School of Economics and Political Science, LSE Library.
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