Trade liberalization and strategic outsourcing
AbstractThis paper develops a theory of strategic outsourcing that arises due to trade liberalization. With trade liberalization, a domestic firm may choose to purchase the intermediate good from a more efficient foreign producer, who also competes with the domestic firm in the final-good market. This can result in higher prices for both the intermediate and final goods. Although trade liberalization in the final product would lower the price of the final good, it could cause the price of the intermediate product to either increase or decrease, depending on the characteristics of the final products. Therefore, in the presence of strategic outsourcing, trade liberation can have ambiguous effects on consumer prices, depending on the relative tariff reductions for intermediate and final goods.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 63 (2004)
Issue (Month): 2 (July)
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Web page: http://www.elsevier.com/locate/inca/505552
Other versions of this item:
- Yongmin Chen & Jota Ishikawa & Zhihao Yu, 2002. "Trade Liberalization and Strategic Outsourcing," Carleton Economic Papers 02-12, Carleton University, Department of Economics, revised Jul 2004.
- Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2001. "Trade Liberalization and Strategic Outsourcing," Discussion Papers 2001-04, Graduate School of Economics, Hitotsubashi University.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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