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Wiley InterScience | ||||||||||||||||
  Review of International EconomicsVolume 13 Issue 1, Pages 106 - 128 Published Online: 4 Feb 2005 © 2010 Blackwell Publishing Ltd International Economics and Finance Society
Abstract | References | Full Text: PDF (Size: 242K) | Related Articles | Citation Tracking  A Schumpeterian North–South Growth Model of Trade and Wage Inequality* *I wish to thank the seminar participants of the University of Regensburg (Germany), Maastricht University (the Netherlands), and participants of the DEGIT VII conference, Cologne (Germany), 24–25 May 2002, for helpful comments. Detailed comments and suggestions of two anonymous referees are gratefully acknowledged. Any remaining errors are my responsibility. Copyright Blackwell Publishing Ltd 2005. Abstract
The paper presents a dynamic general-equilibrium model of interindustry North–South trade that is used to analyze the effects of trade liberalization on the Northern wage distribution. Both countries have a low-tech sector where consumer goods of constant quality are produced by use of unskilled labor. The North also has a high-tech sector that employs skilled labor and features a quality-ladder model structure with endogenous growth. Both innovation and skill acquisition rates are endogenously determined. In a balanced trade equilibrium, it is found that Southern-originated (Northern-originated) trade liberalization leads to an increase (decrease) in Northern wage inequality both between skilled and unskilled workers and within the group of skilled workers. The endogenous change in the Southern terms of trade determines the direction of change in unskilled wages in both the North and the South. | 
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IT'S TIME TO RENEW
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