A New Impetus for Endogenous Growth: R&D Offshoring via Virtual Labor Mobility


We develop a simple North-South model of quality ladders to show that the virtual mobility of labor across time zones, facilitated by the advance in communication technology, can raise the endogenous growth rate of the world economy. The unique balanced growth rate is increasing in the endowments of skilled labor in both countries and decreasing in the rate of impatience. Moreover, we find that partial R&D offshoring to the South has initially a negative effect on the level of skilled wages in the North, but this is compensated for by its positive effect on the growth rate in both North and South.

Report No.: HIAS-E-95
Author(s): Noritsugu Nakanishi(a)
Ngo Van Long(b), (c)
Affiliation: (a) Kobe University, Rokkodai-cho 2-1, Nada-ku, Kobe 657-8501, Japan
(b) McGill University, Montreal, Canada
(c) Hitotsubashi Institute for Advanced Study, Hitotsubashi University
Issued Date: February 2020
Keywords: R&D Offshoring, Virtual labor mobility, Time zone difference, Endogenous growth, North-South trade
JEL: F43, O41