A tale of two countries: Directed technical change,trade and migratory movements |
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Institution: | 1. Munich Center for Economics of Aging and CEFUP, Portugal;2. University of Porto, Faculty of Economics, CEFUP and OBEGEF, Portugal;3. University of Porto, Faculty of Economics and CEFUP, Portugal;1. School of Data Sciences, Zhejiang University of Finance and Economics, Hangzhou, Zhejiang, 310018, PR China;2. Department of Statistics, The University of British Columbia, Vancouver, BC, Canada;1. Faculty of Economics, Chulalongkorn University, Bangkok, Thailand;2. Department of Econometrics and Business Statistics, Monash University, Victoria, Australia;1. School of Economics and Management, Beihang University, Beijing, 100191, China;2. College of Business, University of Nevada, Reno, Reno, NV 89557, USA;1. INCEIF, Kuala Lumpur, Malaysia;2. Taylor''s Business School, Taylor''s University, Malaysia;3. Nottingham University Business School, University of Nottingham Malaysia Campus, Semenyih, Malaysia;4. Suleman Dawood School of Business, Lahore University of Management Sciences (LUMS), Lahore, Pakistan;1. School of Economics and Finance, Xi’an Jiaotong University, Shaanxi, China;2. Business School, University of Jinan, China;3. Finance Research Institute, Shandong Collaborative Innovation Center for Capital Market Innovation and Development, University of Jinan, China;1. Zhongnan University of Economics and Law, Wuhan, 430073, Hubei, China;2. Zhejiang University of Finance & Economics, Hangzhou, China;3. School of Economics and Management, China University of Geosciences, Wuhan, 430074, China;4. College of Economics and Management, Huazhong Agricultural University, Wuhan, 430073, Hubei, China |
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Abstract: | We propose a North-South model that reconciles trade and production strategies, flows of innovators and the path of economic divergence, or convergence, between countries. We explain the mechanisms behind these forces and show how the technological and economic gaps can be reversed if southern countries stop imitating northern goods and, instead, produce complementary goods. Such a strategy of complementarity on production yields the necessary incentives to innovators to engage in research in southern countries, which enhances the catching-up process between countries. It is also shown that migratory movements of unskilled labor between countries are also relevant to understand the dangers and benefits of different trade strategies for economic growth. This paper suggests a positive (negative) correlation between technological innovation in the North (South) and the level of substitutability in production, while under complementarity, technological innovation catches up in the South, therefore fostering the economic catching up process. A positive correlation between inflows of skilled and unskilled labor and substitutability of production between countries is also verified. |
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Keywords: | Direct technical change Economic growth Innovation Migration Trade O31 O33 O47 F16 F22 J31 |
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