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Title: Trade costs, international production shifting, and growth
Authors: Gao, T. 
Keywords: Growth
Production location
Trade costs
Issue Date: 2007
Citation: Gao, T. (2007). Trade costs, international production shifting, and growth. European Economic Review 51 (2) : 317-335. ScholarBank@NUS Repository.
Abstract: In this paper I present a North-South endogenous growth model in which the impact of globalization on production location and growth can be analyzed. In the model the skilled-labor abundant North is the only innovator in the world. Using the model, I illustrate a scenario that is particularly interesting. Globalization (a reduction in trade costs) leads to a relocation of production to the South in a differentiated-product sector. As a result, more resources are shifted to R&D in the North, and the growth rate in the world increases. The model has several empirically consistent implications, such as rising relative wages of skilled to unskilled labor under globalization in both the North and South. I also discuss the welfare impact of globalization in this model. © 2006 Elsevier B.V. All rights reserved.
Source Title: European Economic Review
ISSN: 00142921
DOI: 10.1016/j.euroecorev.2006.01.004
Appears in Collections:Staff Publications

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