Growth and North-South Wage Gap
We study the sources of long-run growth and wage gap in a North-South (N-S) model with trade and foreign direct investment (FDI). Although R&D is the engine of global growth, increased share of R&D spending need not be accompanied by higher growth rate, and vice versa. Although, investment is induced by productivity growth, investment-output ratio need not rise monotonically with productivity growth. Lower investment-output ratio may accompany higher productivity growth, so higher growth rate need not entail lower share of consumption. We argue that existing models may exaggerate or under-estimate the role of R&D in growth. We also show that higher growth rate is normally accompanied by greater N–S wage gap in the long run. The effect of country size on wage gap is generally ambiguous, depending on the direction and magnitude of scale effects in R&D. Both FDI and S-N migration may increase global growth rate and N-S wage gap.
|Date of creation:||Oct 2000|
|Contact details of provider:|| Postal: Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark|
Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:0012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann)
If references are entirely missing, you can add them using this form.