Defensive Innovations
Journal
IZA Discussion Papers 454
Type
discussion paper
Date Issued
2002-03
Author(s)
Abstract
Defensive innovations in developed countries can explain the empirical phenomenon that openness towards trade with less-developed countries does not necessarily induce a substantial increase in the wage differential and trade volumes. Building on step-by-step innovations as introduced by Aghion et al. (2001), we show that defensive innovations can result from private incentives. In particular, minimum wages can induce defensive innovations which then redistribute income away from workers. Suggestive empirical evidence is consistent with the implications of defensive innovations for wage differentials, trade volumes and the sectorial composition within and across OECD countries.
Language
English
Keywords
Step-by-step innovations
openness
minimum wage
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Subject(s)
Eprints ID
261029