Wake up and Smell the Ginseng: International Trade and the Rise of Incremental Innovation in Low-Wage Countries

Diego Puga and Daniel Trefler

No 222, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: Increasingly, a small number of lowwage countries such as China, India and Mexico are involved in incremental innovation. That is, they are responsible for resolving productionline bugs and suggesting product improvements. We provide evidence of this new phenomenon and develop a model in which there is a transition from oldstyle productcycle trade to trade involving incremental innovation in lowwage countries. The model explains why levels of involvement in incremental innovation vary across lowwage countries and across firms within each lowwage country. We draw out implications for sectoral earnings, living standards, the capital account and, foremost, international trade in goods.

Keywords: international trade; lowwage country innovation (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Pages: 28
Date: 2007-01-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries (2010)
Working Paper: Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:222

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