A Schumpeterian Model of Protection and Relative Wages

Paul Segerstrom and Elias Dinopoulos

American Economic Review, 1999, vol. 89, issue 3, 450-472

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.

JEL-codes: F16 F43 J31 O32 (search for similar items in EconPapers)
Date: 1999
Note: DOI: 10.1257/aer.89.3.450
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Citations: View citations in EconPapers (218)

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Working Paper: A Schumpeterian Model of Protection and Relative Wages (1996)
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