DRI Working Paper No. 13
By Boyan Jovanovic, Department of Economics, NYU
The Product Cycle and Inequality
This paper models the product cycle and explains how it relates to world inequality. In the model, both phenomena arise because skilled people have a comparative advantage in making high-tech products. The model can explain up to a 10:1 income differential between people and up to a 7:1 differential between countries. Tariff policies and intellectual-property protection have a much larger effect here than in some other models.