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  3. American Economic Review
  4. June 1999
  5. A Schumpeterian Model of Protection and Relative Wages

A Schumpeterian Model of Protection and Relative Wages

  • Elias Dinopoulos
  • Paul Segerstrom
American Economic Review
vol. 89, no. 3, June 1999
(pp. 450-472)
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Abstract

This paper presents a dynamic general equilibrium model of R&D-based trade between two structurally identical countries in which both innovation and skill acquisition rates are endogenously determined. Trade liberalization increases R&D investment and the rate of technological change. It also reduces the relative wage of unskilled workers and results in skill upgrading within each industry when R&D is the skilled-labor intensive activity relative to manufacturing of final products. Time-series evidence from the United States and simulation analysis support the empirical relevance of the model, which offers a North-North trade explanation for increasing wage inequality.

Citation

Dinopoulos, Elias, and Paul Segerstrom. 1999. "A Schumpeterian Model of Protection and Relative Wages." American Economic Review, 89 (3): 450-472. DOI: 10.1257/aer.89.3.450

JEL Classification

  • F16 Trade and Labor Market Interactions
  • F43 Economic Growth of Open Economies
  • J31 Wage Level and Structure; Wage Differentials
  • O32 Management of Technological Innovation and R&D