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Outsourcing under Imperfect Protection of Intellectual Property

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  • Amy Jocelyn Glass

Abstract

The paper examines possible reasons behind expanded outsourcing by modeling outsourcing decisions when intellectual property rights are imperfectly protected. Firms in the North develop higher quality levels of existing products and then decide whether to shift some stages of production to the South. Production in the South lowers costs but entails risk of imitation by Southern firms. In this setting, a lower risk of imitation or larger labor supplies can cause increased outsourcing, a higher rate of innovation, and a lower Northern relative wage. Damage due to lower incomes can be offset by gains in terms of better quality products.

Suggested Citation

  • Amy Jocelyn Glass, 2004. "Outsourcing under Imperfect Protection of Intellectual Property," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 867-884, November.
    • Handle: RePEc:bla:reviec:v:12:y:2004:i:5:p:867-884
    DOI: 10.1111/j.1467-9396.2004.00487.x
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    References listed on IDEAS

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    1. Segerstrom, Paul & Dinopoulos, Elias, 2003. "A Theory of North-South Trade and Globalization," CEPR Discussion Papers 4140, C.E.P.R. Discussion Papers.
    2. Kenneth Scheve & Matthew Slaughter, 2002. "Economic Insecurity and the Globalization of Production," NBER Working Papers 9339, National Bureau of Economic Research, Inc.
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