Discussion Paper Details

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Title: A Theory of Defensive Skill-based Innovation and Globalization

Author(s): Mathias Thoenig and Thierry Verdier

Publication Date: June 2002

Keyword(s): defensive innovation, skill bias, technical change and trade integration

Programme Area(s): International Trade and Regional Economics and Labour Economics

Abstract: 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.

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Bibliographic Reference

Thoenig, M and Verdier, T. 2002. 'A Theory of Defensive Skill-based Innovation and Globalization'. London, Centre for Economic Policy Research.