DP2291 Winners and Losers in a North-South Model of Growth, Innovation and Product Cycles

Author(s): Michael Chui, Paul L Levine, Joseph Pearlman
Publication Date: November 1999
Keyword(s): Distribution, Economic Growth, Gains from Trade
JEL(s): F43, O41
Programme Areas: International Macroeconomics, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2291

The paper examines the welfare gains from North-South trade and their distribution. We construct an endogenous growth North-South model with four Southern stages of development as possible equilibria: specialisation in a traditional good; the South in addition copies Northern high-tech manufactured goods; the South begins to innovate in its own right and finally a stage in which the South only innovates, as in the North. We use this model to show that dynamic gains from trade and from Southern development through the stages can create new winners, unskilled workers in the North and possibly skilled workers in the South.