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An Analysis of Income Distribution between the North and the South: the Grossman–Helpman and Lai Results Re‐examined

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  • Takanori Shimizu
  • Yoshifumi Okawa
  • Hisayuki Okamoto

Abstract

This paper studies the effects of labor supply on relative wages in a dynamic North–South model of trade. Lai (1995)—a generalization of the Grossman and Helpman (1991a,b, ch. 11) models—showed that the relative wage of skilled (unskilled) labor in a region is positively (negatively) related to the supply of skilled (unskilled) labor in that region. These surprising results depend crucially on the specification of the functional form of the Southern imitation activity. We will show that these results (except for the relative wage of unskilled labor in Lai) are reversed in the case where the productivity of imitation depends only on the number of products the North manufactures.

Suggested Citation

  • Takanori Shimizu & Yoshifumi Okawa & Hisayuki Okamoto, 2008. "An Analysis of Income Distribution between the North and the South: the Grossman–Helpman and Lai Results Re‐examined," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 159-172, February.
    • Handle: RePEc:bla:reviec:v:16:y:2008:i:1:p:159-172
    DOI: 10.1111/j.1467-9396.2007.00733.x
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    References listed on IDEAS

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    1. Grossman, Gene M & Helpman, Elhanan, 1991. "Endogenous Product Cycles," Economic Journal, Royal Economic Society, vol. 101(408), pages 1214-1229, September.
    2. Connolly, Michelle, 2003. "The dual nature of trade: measuring its impact on imitation and growth," Journal of Development Economics, Elsevier, vol. 72(1), pages 31-55, October.
    3. Lai, Edwin L. C., 1995. "The product cycle and the world distribution of income A reformulation," Journal of International Economics, Elsevier, vol. 39(3-4), pages 369-382, November.
    4. Jensen, Richard & Thursby, Marie, 1986. "A strategic approach to the product life cycle," Journal of International Economics, Elsevier, vol. 21(3-4), pages 269-284, November.
    5. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-266, April.
    6. Takanori Shimizu & Hisayuki Okamoto, 2005. "An analysis of stability of the north-south growth model of trade: Saddle-path stability of the generalized grossman-helpman model with skilled and unskilled labours," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(3), pages 299-317.
    7. Arnold, Lutz G., 2000. "Stability of the Market Equilibrium in Romer's Model of Endogenous Technological Change: A Complete Characterization," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 69-84, January.
    8. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
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