Territorial comparative advantage, wage inequality, and monetary policy in the global world

• Type: Article in International Scientific Journal
• Date: 2024

Authors

Óscar Afonso (Author) FEP; Pedro Rui Mazeda Gil (Author) FEP

Journal

Title: Journal of International Money and Finance

Vol. 143

ISSN: 0261-5606

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 2 Citations

Scopus - 2 Citations

Other information

Authenticus ID: P-010-7N1

DOI: 10.1016/j.jimonfin.2024.103075

Abstract (EN): We analyze the effects of trade under relocations from an innovator to a follower region in a context with region-specific monetary policy and long-run inflation. We propose an endogenous growth model of two regions with intermediate goods of different skill intensities that are traded internationally. We show that the greater the benefits of relocations, the greater the territorial comparative advantage of followers. The better worldwide allocation of production due to relocations releases resources for R&D activities, increasing internationally available technological knowledge. In both regions, this ensures an increase in wage levels of skilled and unskilled workers and in economic growth. The structural stance of monetary policy in the follower region affects the optimal value of reallocations, but not the worldwide economic growth and skill premium. Yet, the monetary policy of the innovator region may penalize worldwide growth and impact the skill premium. Dynamic effects of relocations, under certain conditions, increase the skill premium in both regions. © 2024 The Author(s)

Language: English

Type (Professor's evaluation): Scientific