TY  - JOUR
AU  - Puga,Diego
AU  - Trefler,Daniel
TI  - Wake Up and Smell the Ginseng: The Rise of Incremental Innovation in Low-Wage Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11571
PY  - 2005
Y2  - August 2005
UR  - http://www.nber.org/papers/w11571
L1  - http://www.nber.org/papers/w11571.pdf
N1  - Author contact info:
Diego Puga
Centro de Estudios Monetarios y Financieros (CEMFI
Casado del Alisal 5,
28014 Madrid
Spain
Tel: +34918073355
Fax: NA
E-Mail: diego.puga@cemfi.es

Daniel Trefler
Rotman School of Management
University of Toronto
105 St. George Street
Toronto, ON M5S 3E6
CANADA
Tel: 416/946-7945
Fax: 416/978-5433
E-Mail: dtrefler@rotman.utoronto.ca
AB  - 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.
ER  -