Innovation and wage effects of international outsourcing

Article Abstract:

We investigate the effects in increased outsourcing of production to low wage country. Such international outsourcing lowers the marginal cost of production and thus increases profits, creating greater incentives for innovation. A reduction in the resource requirement in adapting technology relative to improving products or an expansion in the portion of production that can be outsourced generates a greater extent of international outsourcing, a lower relative wage and a faster rate of innovation. An increase in production taxes in the North, production subsides in the South, or a subsidy to adapting technologies has similar effects. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: F21; F43; O31; O34 Keywords: International outsourcing; Innovation; Adaptation

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A minimum wage can be welfare-improving and employment-enhancing

Article Abstract:

We examine whether minimum wages can fulfill a useful role as part of an optimal tax-transfer scheme. The government cannot observe household abilities, only their incomes, and is constrained to ensure that those working are at least as well-off as those not working. A minimum wage combined with the institutional features of typical welfare systems allows the incentive constraint to be severed at the ability level associated with the minimum wage. If such a scheme can be enforced, the government can increase the amount of redistribution from those working to those not working, and possibly lower the number of unemployed. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: H21; H23; J38 Keywords: Minimum wage; Optimal income tax; Unemployment

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International cooperation for sale

Article Abstract:

This paper shows that strong asymmetry among countries warrants a change in the rules of the game of global public goods provision, with the consequence that cooperation by some countries is bought by others and aggregate welfare is increased, perhaps substantially. Side payments on their own have virtually no effect on the outcomes that can be sustained by self-enforcing cooperative agreements. But when the rules of the game are changed by strong asymmetry -- when some countries are effectively `committed' to being non-signatories to an agreement eschewing money transfers -- side payments become the vehicle for increasing participation in a cooperative agreement. Keywords: International agreements; Side payments; Public goods

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