A dynamic North-South model of demand-induced product cycles

Reto Foellmi, Sandra Hanslin Grossmann () and Andreas Kohler

No 2015-04, Working Papers from Swiss National Bank

Abstract: This paper presents a dynamic North-South general-equilibrium model where households have non-homothetic preferences. Innovation takes place in a rich North while firms in a poor South imitate products manufactured in the North. Introducing non-homothetic preferences delivers a complete international product cycle as described by Vernon (1966), where the different stages of the product cycle are determined not only by supply side factors but also by the distribution of income between North and South. We ask how changes in Southern labour productivity, population size in the South and inequality across regions affect the international product cycle. In line with presented stylised facts about the product cycle we predict a negative correlation between adoption time and per capita incomes.

Keywords: Product cycles; Inequality; International trade (search for similar items in EconPapers)
JEL-codes: F1 O3 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: A dynamic North-South model of demand-induced product cycles (2018)
Working Paper: A Dynamic North-South Model of Demand-Induced Product Cycles (2015)
Working Paper: A Dynamic North-South Model of Demand-Induced Product Cycles (2015)
Working Paper: A Dynamic North-South Model of Demand-Induced Product Cycles (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2015-04

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