A Schumpeterian Model of Protection and Relative Wages
- (pp. 450-472)
AbstractThis 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.
Citation1999. "A Schumpeterian Model of Protection and Relative Wages." American Economic Review, 89(3): 450-472. DOI: 10.1257/aer.89.3.450
- 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