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A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe

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  • Dalia Marin

Abstract

Europe is reorganizing its international value chain. I document these changes in Europe's international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intrafirm trade between Austria or Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labor in Europe. I find among other things that falling trade costs and reduced levels of corruption as well as improvements in the contracting environment in Eastern Europe are affecting the level of intrafirm imports from that region. These factors also favor outsourcing over offshoring. In contrast, low organizational costs of hierarchies and large costs of holdup (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) favor offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice. (JEL: D23; D51; F11; L14; O11) (c) 2006 by the European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 4 (2006)
Issue (Month): 2-3 (04-05)
Pages: 612-622

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Handle: RePEc:tpr:jeurec:v:4:y:2006:i:2-3:p:612-622

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  1. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 552-580, June.
  2. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2005. "Contracts and the Division of Labor," NBER Working Papers 11356, National Bureau of Economic Research, Inc.
  3. Marin, Dalia & Verdier, Thierry, 2012. "Globalization and the empowerment of talent," Journal of International Economics, Elsevier, vol. 86(2), pages 209-223.
  4. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 569-600, 05.
  5. Marin, Dalia & Schnitzer, Monika, 1995. "Tying Trade Flows: A Theory of Countertrade with Evidence," American Economic Review, American Economic Association, vol. 85(5), pages 1047-64, December.
  6. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  7. Lorentowicz, Andzelika & Marin, Dalia & Raubold, Alexander, 2005. "Is Human Capital Losing From Outsourcing? Evidence for Austria and Poland," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 76, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Marin, Dalia & Verdier, Thierry, 2008. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 227, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2001. "Expansion Strategies of U.S. Multinational Firms," BEA Papers 0012, Bureau of Economic Analysis.
  10. Dalia Marin & Monika Schnitzer, 2002. "Contracts in Trade and Transition: The Resurgence of Barter," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262133997, December.
  11. Marin, Dalia & Lorentowicz, Andzelika & Raubold, Alexander, 2002. "Ownership, Capital or Outsourcing: What Drives German Investment to Eastern Europe?," Discussion Papers in Economics 72, University of Munich, Department of Economics.
  12. repec:hrv:faseco:4784029 is not listed on IDEAS
  13. Marin, Dalia, 2004. "A Nation of Poets and Thinkers - Less so with Eastern Enlargement? Austria and Germany," CEPR Discussion Papers 4358, C.E.P.R. Discussion Papers.
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