Template-type: ReDIF-Paper 1.0
Author-Name: Reto Foellmi
Author-Name-First: Reto
Author-Name-Last: Foellmi
Author-Name: Dr. Sandra Hanslin Grossmann
Author-Name-First: Sandra
Author-Name-Last: Hanslin Grossmann
Author-Person: pha748
Author-Name: Andreas Kohler
Author-Name-First: Andreas
Author-Name-Last: Kohler
Title: A dynamic North-South model of demand-induced product cycles
Abstract: This paper presents a dynamic North-South general-equilibrium model where households have non-homothetic preferences. Innovation takes place in a rich North while firms in a poor South imitate products manufactured in the North. Introducing non-homothetic preferences delivers a complete international product cycle as described by Vernon (1966), where the different stages of the product cycle are determined not only by supply side factors but also by the distribution of income between North and South. We ask how changes in Southern labour productivity, population size in the South and inequality across regions affect the international product cycle. In line with presented stylised facts about the product cycle we predict a negative correlation between adoption time and per capita incomes.
Length: 41 pages
Creation-Date: 2015
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2015/working_paper_2015_04
File-Format: text/html
Number: 2015-04
Classification-JEL: F1, O3
Keywords: Product cycles, Inequality, International trade
Handle: RePEc:snb:snbwpa:2015-04