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

Diego Puga and Daniel Trefler

No 11571, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Increasingly, a small number of low-wage countries such as China and India are involved in innovation -- not `big ideas' innovation, but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this new phenomenon 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 within each low-wage country. We then draw out implications for the location of production, trade, capital flows, earnings and living standards.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-cwa, nep-ino, nep-lab and nep-tra
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Citations: View citations in EconPapers (18)

Published as Puga, Diego & Trefler, Daniel, 2010. "Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries," Journal of Development Economics, Elsevier, vol. 91(1), pages 64-76, January.

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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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