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Globalization, R&D and the iPod Cycle

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  • Sener, Fuat
  • Zhao, Laixun

Abstract

This paper constructs a dynamic scale-free North-South model of trade with endogenous innovation. In the North a local-sourcing-targeted race and an outsourcing-targeted R&D race take place simultaneously within each industry. The former results in the winner firm manufacturing in the North, while the latter culminates in the winner firm's immediate outsourcing to the South, generating the iPod cycle. We study three aspects of globalization: reductions in the resource-requirement in outsourcing-targeted R&D, increased subsidies to outsourced production, and reduced Southern imitation due to TRIPs. Each event boosts outsourcing-targeted R&D and increases the frequency of iPod cycles. The aggregate innovation rate rises despite a possible fall in local-sourcing-targeted R&D, and the North-South relative wage decreases.

Suggested Citation

  • Sener, Fuat & Zhao, Laixun, 2009. "Globalization, R&D and the iPod Cycle," Journal of International Economics, Elsevier, vol. 77(1), pages 101-108, February.
    • Handle: RePEc:eee:inecon:v:77:y:2009:i:1:p:101-108
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    References listed on IDEAS

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    Cited by:

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    2. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    3. Tetsugen Haruyama & Ken-ichi Hashimoto, 2020. "Innovators and imitators in a world economy," Journal of Economics, Springer, vol. 130(2), pages 157-186, July.
    4. Nuttapon Photchanaprasert, 2011. "Innovation and Production Offshoring: Implications on Welfare," Global COE Hi-Stat Discussion Paper Series gd10-185, Institute of Economic Research, Hitotsubashi University.
    5. García-Vega, María & Huergo, Elena, 2019. "The role of international and domestic R&D outsourcing for firm innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 775-792.
    6. Basant Kapur, 2015. "A symmetric Heckscher–Ohlin model of endogenous growth," Journal of Economics, Springer, vol. 116(3), pages 183-209, November.
    7. Olena Ivus & Walter Park & Kamal Saggi, 2015. "Patent Protection and the Industrial Composition of Multinational Activity: Evidence from U.S. Multinational Firms," Vanderbilt University Department of Economics Working Papers 15-00014, Vanderbilt University Department of Economics.
    8. Adolfo Cristóbal Campoamor, 2019. "Gradual trade liberalization in a North–South model of the product cycle," Journal of Economics, Springer, vol. 127(3), pages 265-292, August.
    9. Ma, Yan, 2015. "The product cycle hypothesis: The role of quality upgrading and market size," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 326-336.
    10. Canals, Claudia & Şener, Fuat, 2014. "Offshoring and intellectual property rights reform," Journal of Development Economics, Elsevier, vol. 108(C), pages 17-31.
    11. Grieben, Wolf-Heimo & Şener, Fuat, 2017. "Wage bargaining, trade and growth," Research in Economics, Elsevier, vol. 71(3), pages 564-587.
    12. Tatsuro Iwaisako & Hitoshi Tanaka, 2020. "Tariffs and Foreign Direct Investment in a North South Product Cycle Model," Discussion Papers in Economics and Business 20-08, Osaka University, Graduate School of Economics.
    13. Grieben, Wolf-Heimo & Sener, Fuat, 2009. "Globalization, rent protection institutions, and going alone in freeing trade," European Economic Review, Elsevier, vol. 53(8), pages 1042-1065, November.

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