We adapt Yeaple's (2005) heterogeneous agents framework to model firms in the North as making explicit offshore outsourcing decisions to cheap-labor economies. Globalization results from a lowering of the set-up costs incurred when engaging in offshore activities. We highlight how...

We address the effects of FDI on the labor share in developing countries. Our theory relies on the impacts of FDI on wage and labor productivity in a frictional labor market. FDI have two opposite effects on the labor share: a negative force originated by technological advance, and a positive...