Trade, Product Cycles, and Inequality within and between Countries

19 Pages Posted: 15 Oct 2004

See all articles by Susan Chun Zhu

Susan Chun Zhu

Michigan State University - Department of Economics

Abstract

This paper incorporates Northern product innovation and product-cycle-driven technology transfer into the continuum-of-goods Heckscher-Ohlin model. The creation of very skill-intensive goods induces the North to transfer production of older, less skill-intensive goods to the South. These relocated goods are the most skill intensive by Southern standards. Hence, product cycles raise the relative demand for skilled workers and thus wage inequality within both regions. This runs contrary to the Stolper-Samuelson theorem, but accords well with the fact that wage inequality has risen in both Northern and Southern countries. Moreover, product cycles increase income inequality between countries.

JEL Classification: F1

Suggested Citation

Chun Zhu, Susan, Trade, Product Cycles, and Inequality within and between Countries. Canadian Journal of Economics Vol. 37, No. 4, pp. 1042-1060, November 2004. Available at SSRN: https://ssrn.com/abstract=605132

Susan Chun Zhu (Contact Author)

Michigan State University - Department of Economics ( email )

214 Marshall Hall
East Lansing, MI 48824
United States
517-355-9647 (Phone)
517-432-1068 (Fax)

HOME PAGE: http://www.msu.edu/~ec/faculty/zhu/zhu.html

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