A Theory of North-South Trade and Globalization

Paul Segerstrom and Elias Dinopoulos

No 4140, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper develops a dynamic general equilibrium model of North-South trade with scale-invariant growth. Northern firms devote resources to innovative R&D to discover higher quality products and Southern firms devote resources to imitative R&D to copy state-of-the-art quality Northern products. Both innovation and imitation rates are endogenously determined as well as the degree of wage inequality between Northern and Southern workers. The steady-state effects of globalization and stronger protection of intellectual property are analysed. It is shown that globalization leads to more copying of Northern products, faster technological change, and less wage inequality between Northern and Southern workers. Stronger intellectual property protection has the opposite steady-state effects and thus serves to moderate the effects of globalization.

Keywords: Economic growth; North-south trade; Globalization; Intellectual property rights (search for similar items in EconPapers)
JEL-codes: F12 F43 O31 O34 (search for similar items in EconPapers)
Date: 2003-12
New Economics Papers: this item is included in nep-dev and nep-dge
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Citations: View citations in EconPapers (10)

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Working Paper: A Theory of North-South Trade and Globalization (2004)
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