Wake Up and Smell the Ginseng: The Rise of Incremental Innovation in Low-Wage Countries

Diego Puga and Daniel Trefler

No 5286, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Increasingly, a small number of low-wage countries such as China and India are involved in innovation - not the `big ideas', but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this and develop a model in which there is a transition from old-style product-cycle trade to trade involving incremental innovation in low-wage countries. We explain why levels of involvement in innovation vary across low-wage countries and even across firms in each low-wage country. We then draw out the implications of this for the location of production, trade, capital flows, earnings and living standards.

Keywords: International trade; Low-wage country innovation (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2005-10
New Economics Papers: this item is included in nep-cna, nep-ino, nep-int, nep-lab, nep-sea and nep-tra
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Citations: View citations in EconPapers (15)

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Working Paper: Wake Up and Smell the Ginseng: The Rise of Incremental Innovation in Low-Wage Countries (2005)
Working Paper: Wake up and smell the ginseng: The rise of incremental innovation in low-wage countries (2005)
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