[May 2026] I still think the paper’s core claim holds and has aged into direct relevance: factor prices do not equalise across countries because real transaction costs (language, geography, home-country bias, coordination across distance) persist as a wedge, and an apparent wage gap is the market signalling that those costs are real rather than evidence someone has solved the labour-arbitrage trick.
I first became interested in outsourcing during my employment at Frontera Corporation in 1999. Less expensive employees working with H-1B visas or contractors replaced many of our most seasoned programmers and project managers. As I learned how decreasing transaction costs would cause price (wage) differences between countries to narrow, I realized just how important this topic would become for the next decade.
At over fifty pages with several pages of econometric tables, the paper is too large to attempt to reproduce here for you in HTML format. I have included the introduction as a teaser below and hope you will download and enjoy the full paper. I also hope that you find it interesting and I look forward to hearing your comments.
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