Innovation and Wage Effects of International Outsourcing

European Economic Review

Posted: 8 Feb 1999

See all articles by Amy Jocelyn Glass

Amy Jocelyn Glass

Texas A&M University - Department of Economics

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics

Abstract

We study the role of increased outsourcing of production to a low wage country on relative wages across countries and innovation incentives. In particular, we examine the following causal forces behind an increase in the extent of international outsourcing: 1) a reduction in the resource requirement in adapting technology relative to improving products, 2) an expansion in the portion of production that can be outsourced, 3) an increase in production taxes in the North, 4) an increase in production subsidies in the South, and 5) an increase in the subsidy to adapting technologies. Each of these causal forces generates a lower relative wage and a faster rate of innovation, in addition to a greater extent of international outsourcing.

Note: This is a description of the paper, and not the actual abstract.

JEL Classification: F21, F43, O31, O34

Suggested Citation

Glass, Amy Jocelyn and Saggi, Kamal, Innovation and Wage Effects of International Outsourcing. European Economic Review, Available at SSRN: https://ssrn.com/abstract=146228

Amy Jocelyn Glass (Contact Author)

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States
979-845-8507 (Phone)
979-847-8757 (Fax)

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States
214-768-3274 (Phone)
214-768-1821 (Fax)

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