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Defensive Innovations

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  • Koeniger, Winfried

    (University of St. Gallen)

Abstract

Defensive innovations in developed countries can explain the empirical phenomenon that openness towards trade with less-developed countries does not necessarily induce a substantial increase in the wage differential and trade volumes. Building on step-by-step innovations as introduced by Aghion et al. (2001), we show that defensive innovations can result from private incentives. In particular, minimum wages can induce defensive innovations which then redistribute income away from workers. Suggestive empirical evidence is consistent with the implications of defensive innovations for wage differentials, trade volumes and the sectorial composition within and across OECD countries.

Suggested Citation

  • Koeniger, Winfried, 2002. "Defensive Innovations," IZA Discussion Papers 454, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp454
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    References listed on IDEAS

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    More about this item

    Keywords

    Step-by-step innovations; minimum wage; openness;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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