A Dynamic North-South Model of Demand-Induced Product Cycles

Reto Foellmi, Sandra Hanslin Grossmann () and Andreas Kohler ()

No 1504, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: This paper presents a dynamic North-South general-equilibrium model where per capita incomes shape demand patterns across regions. Innovation takes place in a rich North while firms in a poor South imitate products manufactured in North. Allowing a role for per capita incomes in determining demand delivers a complete international product cycle as described by Vernon (1966), where the different stages of the product cycle are not only determined by supply-side factors but also by the distribution of income between North and South. We analyze how changes in the gap between North and South due to changes in Southern labor productivity, population size in South and inequality across regions affect the international product cycle. In line with presented stylized facts, we predict a negative correlation between adoption time and per capita incomes.

Keywords: International product cycles; Inequality; International trade (search for similar items in EconPapers)
JEL-codes: F1 O3 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015-02
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1504.pdf (application/pdf)

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:usg:econwp:2015:04

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