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Non-Scale Effects of North-South Trade on Economic Growth

Author

Listed:
  • Oscar Afonso
  • Alvaro Aguiar
Abstract
In this model of North and South economies, growth is driven by Schumpeterian R&D and by accumulation of two types of human capital, versatile and specialized. The former is school intensive while the latter is on-the-job-training intensive. Growth is endogenous and independent of scale effects. South's imitation of existing technology is conditional to the distance to the technological frontier. Growth depends on technological advances in the quality of available intermediate goods, regardless of the origin - innovation or imitation -, and not on comparative advantage in the production of final goods. By allowing immediate international access of the state-of-the-art intermediate goods, trade affects the productive structure in the South, bringing about partial convergence to the Northern structure and prices. Nevertheless, even when the countries have access to the same technology - either through imitation or trade of intermediate goods -, differences in domestic institutions and human capital imply differences in productivity. In addition, trade induces steady-state effects through the price channel, by which the specific types of human capital influence the direction of technological progress. The consideration of two types of human capital also allows the study of wage inequality effects of trade, as well as the derivation of a Schumpeterian dynamic equivalent to the static Stolper-Samuelson factor price equalization result.

Suggested Citation

  • Oscar Afonso & Alvaro Aguiar, 2003. "Non-Scale Effects of North-South Trade on Economic Growth," DEGIT Conference Papers c008_013, DEGIT, Dynamics, Economic Growth, and International Trade.
    • Handle: RePEc:deg:conpap:c008_013
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    File URL: http://degit.sam.sdu.dk/papers/degit_08/C008_013.pdf
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    Cited by:

    1. Oscar Afonso & AGUIAR, Alvaro, 2004. "Human Capital Accumulation and Wage Inequality with Scale-Independent North-South Technological Diffusion," DEGIT Conference Papers c009_026, DEGIT, Dynamics, Economic Growth, and International Trade.

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    More about this item

    Keywords

    North-South; International trade; R&D; Human capital; Scale effects; Economic growth;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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