Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/21502
Authors: 
Koeniger, Winfried
Year of Publication: 
2002
Series/Report no.: 
IZA Discussion paper series 454
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.
Subjects: 
Step-by-step innovations
openness
minimum wage
JEL: 
F1
F4
O3
Document Type: 
Working Paper

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