Technological convergence, competitiveness, and welfare: A study of international manufacturing industries

In this study, a monopolistic competition model is used to investigate the effects of international technological convergence on factor rewards, output composition, and welfare. Four testable hypotheses on the impact of technological convergence on follower's and leader's competitiveness and welfare are presented. We then use 1993-2001 data from 128 manufacturing industries in 35 countries to test these hypotheses. Results show that followers' relative wages and global value-added shares increase with technological convergence. Followers benefit from convergence's positive income effect. Leader's own technological progress is the key to its welfare improvement, while terms-of-trade effects appear less important.