International Outsourcing, Innovation and Growth

University of Missouri Working Paper No. 02-13

27 Pages Posted: 22 Jan 2003

See all articles by Ting Gao

Ting Gao

University of Missouri at Columbia - Department of Economics; University of Hong Kong

Date Written: July 2002

Abstract

In this paper I present a North-South endogenous growth model in which the impact of globalization on international outsourcing and growth can be analyzed. In the model, the skilled-labor abundant North is the only innovator in the world. Globalization (a reduction in trade costs) leads to a relocation of production to the South in a differentiated-product sector, and a rise in outsourcing by Northern firms. In addition, more resources are shifted to R&D in the North, and the growth rate in the world increases. The model has several empirically consistent implications, such as rising relative wages of skilled to unskilled labor under globalization in both the North and South. I also discuss the welfare impact of globalization in this model.

Keywords: International, Outsourcing, Innovation, Growth

JEL Classification: F15, F43, O31, R15

Suggested Citation

Gao, Ting, International Outsourcing, Innovation and Growth (July 2002). University of Missouri Working Paper No. 02-13, Available at SSRN: https://ssrn.com/abstract=345341 or http://dx.doi.org/10.2139/ssrn.345341

Ting Gao (Contact Author)

University of Missouri at Columbia - Department of Economics ( email )

118 Professional Building
Columbia, MO 65211
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573-884-8005 (Phone)
573-882-2697 (Fax)

University of Hong Kong

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Hong Kong, HK
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