Globalization of production and the technology transfer paradox

Edwin Lai ()

No 810, Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper develops a growth model aimed at understanding the effects of globalization of production on rate of innovation, distribution of labor income between the North and South and welfare of workers in both regions. We adopt a dynamic general equilibrium product cycle model, assuming that the North specializes in innovation and the South specializes in imitation. Globalization of production resulting from trade liberalization and imitation of the North?s technology by the South increases the rate of innovation. When the South?s participation in the product cycle is not too deep, further deepening of globalization of production lowers the wage of Southern labor relative to that of its counterpart in the North. This poses a technology transfer paradox similar to that discovered by Jones and Ruffin (forthcoming, JIE): an increase in the uncompensated technology transfer from the North to the South makes the North better off. However, a point will be reached where further deepening of globalization leads to increases in relative wage of the South. For this reason, the North would eventually lose from uncompensated technology transfer as globalization deepens.

Keywords: Globalization; Technology; International trade; Developing countries; Production (Economic theory) (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.dallasfed.org/~/media/documents/research/papers/2008/wp0810.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:0810

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Dallas Contact information at EDIRC.
Bibliographic data for series maintained by Amy Chapman ().