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Trading Tasks: A Simple Theory of Offshoring

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  • Gene M. Grossman
  • Esteban Rossi-Hansberg

Abstract

We propose a theory of the global production process that focuses on tradeable tasks, and use it to study how falling costs of offshoring affect factor prices in the source country. We identify a productivity effect of task trade that benefits the factor whose tasks are more easily moved offshore. In the light of this effect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conflict that typically results from reductions in the cost of trading goods. (JEL F11, F16)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 5 (December)
Pages: 1978-97

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Handle: RePEc:aea:aecrev:v:98:y:2008:i:5:p:1978-97

Note: DOI: 10.1257/aer.98.5.1978
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  1. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
  2. Marin, Dalia & Verdier, Thierry, 2004. "Globalization and the Empowerment of Talent," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 1, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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  10. Edward E. Leamer, 1996. "What's the Use of Factor Contents?," NBER Working Papers 5448, National Bureau of Economic Research, Inc.
  11. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2003. "Vertical Production Networks in Multinational Firms," NBER Working Papers 9723, National Bureau of Economic Research, Inc.
  12. Wilhelm Kohler, 2004. "Aspects of International Fragmentation," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 793-816, November.
  13. Grossman, G.M. & Helpman, E., 2002. "Outsourcing in a Global Economy," Papers 218, Princeton, Woodrow Wilson School - Public and International Affairs.
  14. Elhanan Helpman & Gene M. Grossman, 2002. "Managerial Incentives and the International Organization of Production," NBER Working Papers 9403, National Bureau of Economic Research, Inc.
  15. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
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  18. repec:hrv:faseco:4784031 is not listed on IDEAS
  19. Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
  20. Deardorff, A.V., 1998. "Fragmentation Across Cones," Papers 98-14, Michigan - Center for Research on Economic & Social Theory.
  21. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
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