Working Paper: CEPR ID: DP3416
Authors: Mathias Thoenig; Thierry Verdier
Abstract: This Paper considers a dynamic model of innovations in which firms can endogenously bias the direction of technological change. Both in a North-North and North-South context, we show that, when globalization triggers an increased threat of technological leapfrogging or imitation, firms tend to respond to that threat by biasing the direction of their innovations towards skilled labour-intensive technologies. We show that this process of defensive skill biased innovations generates an increase in wage inequalities in both regions. We then discuss suggestive empirical evidence of the existence of defensive skill biased technical change.
Keywords: Defensive Innovation; Skill Bias; Technical Change; Trade Integration
JEL Codes: F12; J31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Globalization (F60) | Threat of technological leapfrogging (O33) |
| Threat of technological leapfrogging (O33) | Bias towards skilled labor-intensive technologies (J24) |
| Bias towards skilled labor-intensive technologies (J24) | Increased wage inequalities (J31) |
| Globalization (F60) | Defensive skill-biased technical change (J24) |
| Defensive skill-biased technical change (J24) | Shift in labor demand towards skilled workers (J24) |
| Trade integration (F15) | Heightened technological competition (O33) |
| Heightened technological competition (O33) | Increased sophistication of technologies (O33) |
| Increased sophistication of technologies (O33) | Reinforced skill intensity of workforce (J24) |
| Globalization (F60) | Increased wage inequalities (J31) |