DP3416 A Theory of Defensive Skill-based Innovation and Globalization

Author(s): Mathias Thoenig, Thierry Verdier
Publication Date: June 2002
Keyword(s): defensive innovation, skill bias, technical change, trade integration
JEL(s): F12, J31, O33
Programme Areas: Labour Economics, International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3416

This Paper considers a dynamic model of innovations in which firms can endogenously bias the direction of technological change. Both in a North-North and North-South context, we show that, when globalization triggers an increased threat of technological leapfrogging or imitation, firms tend to respond to that threat by biasing the direction of their innovations towards skilled labour-intensive technologies. We show that this process of defensive skill biased innovations generates an increase in wage inequalities in both regions. We then discuss suggestive empirical evidence of the existence of defensive skill biased technical change.