In this paper, we propose a panel data semiparametric varying-coefficient model in which covariates (variables affecting the coefficients) are purely categorical. This model has two features: first, fixed effects are included to allow for correlation between individual unobserved heterogeneity...

Using the standard Ricardian model, we developed the numerical result of Samuelson (2004) with general conditions. Specifically, our analysis shows that, the cumulative technological progress of the South will undermine the welfare of the North even before the relative productivities of the two...