EconPapers    
Economics at your fingertips  
 

Foreign productivity improvements and domestic welfare effects

Dionysios Karavidas

Journal of Economic Studies, 2020, vol. 47, issue 1, 132-148

Abstract: Purpose - This paper aims to shed light on two mechanisms that show how foreign productivity improvement affects domestic welfare. Design/methodology/approach - First, this study applies a general equilibrium model that takes into account how wages respond to productivity improvements. Second, this study uses a monopolistic competition model that shows how benefits or losses from foreign productivity changes are distributed within domestic economy. Findings - First of all, this study shows that a region’s productivity improvement is beneficial for the region itself as well as for its trading partner. Moreover, the study finds that productivity improvement in a developing region is beneficial for the entire economy, benefits all unskilled workers in the economy and skilled workers in the developing region and hurts those in the developing region’s trading partner. Originality/value - This study contributes to the existing literature in two key aspects. First, the study applies a two-region, two-factor, one-sector general equilibrium model with flexible wages, and second, the study uses a two-region, two-factor, two-sector monopolistic competition model, relaxing the single-factor (labor) assumption, which is used in other works. Under the single-factor assumption, foreign productivity changes do not have any impact on domestic income distribution. In reality, however, any productivity change between countries creates losers and winners within each country. Hence, the author believes that it is imperative to study how benefits or losses that come from foreign productivity changes are distributed between domestic production factors.

Keywords: Productivity improvements; Welfare economics; General equilibrium; Monopolistic competition; Regional productivity; F1; R10; R11; R13 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.emeraldinsight.com/10.1108/JES-12-2018- ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-12-2018-0459

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://www.emerald.com/jes.htm

Access Statistics for this article

Journal of Economic Studies is currently edited by Professor Mohsen Bahmani-Oskooee

More articles in Journal of Economic Studies from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().

 
Page updated 2021-02-23
Handle: RePEc:eme:jespps:jes-12-2018-0459