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Outsourcing in a Global Economy

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  • Gene M. Grossman
  • Elhanan Helpman

Abstract

We study the determinants of the location of subcontracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs and the nature of the contracting environment in each country. Copyright 2005, Wiley-Blackwell.

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File URL: http://hdl.handle.net/10.1111/0034-6527.00327
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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 72 (2005)
Issue (Month): 1 ()
Pages: 135-159

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Handle: RePEc:oup:restud:v:72:y:2005:i:1:p:135-159

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  1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  2. McLaren, J., 1996. "'Globalization' and Vertical Structure," Discussion Papers, Columbia University, Department of Economics 1996_21, Columbia University, Department of Economics.
  3. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, Elsevier, vol. 54(1), pages 75-96, June.
  4. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics, California Davis - Department of Economics 98-06, California Davis - Department of Economics.
  5. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
  6. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(3), pages 394-424, July.
  7. James E. Rauch & Vitor Trindade, 2000. "Information and Globalization: Wage Co-Movements, Labor Demand Elasticity, and Conventional Trade Liberalization," NBER Working Papers 7671, National Bureau of Economic Research, Inc.
  8. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(1), pages 85-120, February.
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