Economic Integration,Process and Product Innovation,and Relative Skill Demand |
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| Authors: | Sebastian Braun |
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| Institution: | 1. Humboldt University of Berlin, Germany;2. I am grateful to Ronald Bachmann, Michael Burda, Matthias Busse, Thomas Straubhaar, Harald Uhlig, and seminar participants at the Humboldt University of Berlin, the Berlin Network of Labour Market Research and the University of Hamburg for helpful suggestions. This research was supported by the Deutsche Forschungsgemeinschaft through the SFB 649 “Economic Risk” and by the German Federal Ministry of Education and Research (project 01AK702A). All remaining errors are mine. |
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| Abstract: | The interaction between economic integration, product and process innovation, and relative skill demand is analyzed in a model of international oligopoly. Lower trading barriers increase the degree of foreign competition. The competing enterprises respond by investing more aggressively in lowering marginal costs of production. Moreover, firms reduce the substitutability of their products through additional investment in product innovation. The paper also shows that the relative demand for skilled workers may increase as a result. |
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