Knowledge, lacking weight and other physical attributes and being intangible, is a hidden factor of production, making economies grow "weightless." But knowledge is also embedded in technology. If, because of low productivity, poor countries keep buying low-technology machines, will they remain...

We propose and solve a simple model of firm-level decisions to offshore production stages of lower skill intensity than that of activities that remain in the domestic location. In theory, offshoring is optimal only for the more productive among heterogeneous firms if it entails a fixed cost. In...