Abstract Based on the theory of quality ladder, we suppose that northern countries devote resources to innovative R&D activities to discover higher quality products while southern countries devote resources to imitative R&D activities to copy state-of-art quality northern products. The creation of FTA(Free Trade Area) among different countries will make the production transfer globally, resulting to regional income inequality. This paper introduces high-skilled labor and low-skilled labor in the north-south model of Dinopoulos and Segerstrom, making a general analysis of the impact of decreasing trade cost on welfares for workers in different countries in north-north trade, north-south trade and south-south trade, offering theoretical guidance of narrowing regional income inequality by establishing FTA with which types of countries for China.
2014, Vol. 31 
