Non-Scale Effects of North-South Trade on Economic Growth

Oscar Afonso and Alvaro Aguiar

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: In this model of North and South economies, growth is driven by Schumpeterian R&D and by accumulation of two types of human capital, versatile and specialized. The former is school intensive while the latter is on-the-job-training intensive. Growth is endogenous and independent of scale effects. South's imitation of existing technology is conditional to the distance to the technological frontier. Growth depends on technological advances in the quality of available intermediate goods, regardless of the origin - innovation or imitation -, and not on comparative advantage in the production of final goods. By allowing immediate international access of the state-of-the-art intermediate goods, trade affects the productive structure in the South, bringing about partial convergence to the Northern structure and prices. Nevertheless, even when the countries have access to the same technology - either through imitation or trade of intermediate goods -, differences in domestic institutions and human capital imply differences in productivity. In addition, trade induces steady-state effects through the price channel, by which the specific types of human capital influence the direction of technological progress. The consideration of two types of human capital also allows the study of wage inequality effects of trade, as well as the derivation of a Schumpeterian dynamic equivalent to the static Stolper-Samuelson factor price equalization result.

Keywords: North-South; International trade; R&D; Human capital; Scale effects; Economic growth (search for similar items in EconPapers)
JEL-codes: F43 J24 O31 O47 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2003-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Non-Scale Effects of North-South Trade on Economic Growth (2010)
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