Welfare Effects of Technological Convergence in Processed Food Industries
Posted: 11 Apr 2008
Date Written: 2007-07
We develop a monopolistic competition model to investigate effects of international technological convergence on factor rewards, output composition, and welfare. Comparative static analysis indicates technological convergence improves the follower'sbut impairs the leader'sinternational competitiveness. The leader's welfare improves unambiguously; the follower's welfare depends on the relative strength of convergence's income and terms-of-trade effects. We use data from seventeen food industries in thirty countries, 19932001, to test these analytical predictions. Evidence of convergence is found in thirteen of seventeen industries. Convergence lifts followers' relative wages and global value-added shares. Followers benefit from convergence's positive income effect. Leaders benefit from higher terms of trade.
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