A Dynamic North-South Model of Demand-Induced Product Cycles
This paper presents a dynamic North-South general equilibrium model with non- homothetic preferences. Innovation takes place in the rich North while firms in the poor South at random imitate products manufactured in the North. The model is able to generate endogenous product cycles as described by Vernon (1966) where the different stages of the product cycle are not only determined by supply side factors but also by the distribution of income between North and South. We simulate comparative statics results of changes in Southern labor productivity, changes in inequality across regions, and changes in the savings rate. We further provide suggestive evidence for the product cycle stages.
|Date of creation:||2012|
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- Reto Foellmi & Josef Zweimuller, 2006.
"Income Distribution and Demand-Induced Innovations,"
Review of Economic Studies,
Oxford University Press, vol. 73(4), pages 941-960.
- Reto Foellmi & Josef Zweimï¿½ller, "undated". "Income Distribution and Demand-induced Innovations," IEW - Working Papers 212, Institute for Empirical Research in Economics - University of Zurich.
- Foellmi, Reto & Zweimüller, Josef, 2005. "Income Distribution and Demand-Induced Innovations," CEPR Discussion Papers 4985, C.E.P.R. Discussion Papers.
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- Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," CEPR Discussion Papers 5644, C.E.P.R. Discussion Papers.
- Vernon, Raymond, 1979. "The Product Cycle Hypothesis in a New International Environment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 255-267, November.
- Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-266, April.
- Robert C. Feenstra, 1997. "U.S. Exports, 1972-1994: With State Exports and Other U.S. Data," NBER Working Papers 5990, National Bureau of Economic Research, Inc.
- Markusen, James R, 1986. "Explaining the Volume of Trade: An Eclectic Approach," American Economic Review, American Economic Association, vol. 76(5), pages 1002-1011, December. Full references (including those not matched with items on IDEAS)
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