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(a) Activities Ranked by Order in Production Start Finish R&D Component Assembly Marketing production and sales (b) Activities Ranked by High-skilled/Low-skilled Labor Done in Foreign
(a) Activities Ranked by Order in Production Start Finish R&D Component Assembly Marketing production and sales (b) Activities Ranked by High-skilled/Low-skilled Labor Done in Foreign Done at Home Low-skilled High-skilled Assembly Component Marketing R&D production and sales FIGURE 7-1 a. Suppose instead that the Home country requires that low-skilled labor in Foreign be paid a minimum wage that is higher than its current wage (but still less than what low- skilled labor earns at Home). How does this affect the slicing of the value chain, and what happens to the relative demand for skilled labor in each country? b. Continuing from part (c). suppose that the minimum wage for low-skilled labor in Foreign is high enough that the relative wage of low-skilled/high-skilled labor in Foreign exceeds that in Home. Under these circumstances, what goods on the value chain will Home choose to offshore to Foreign
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