American Economic Review Vol. 89 No. 3 1999
A Schumpeterian Model of Protection and Relative Wages
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.
- DOI
- 10.1257/aer.89.3.450
- Volume
- 89
- Issue
- 3
- Pages
- 450-472
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref