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Off-Shoring of Business Services and De-Industrialization: Threat or Opportunity - and for Whom?

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Author Info
Frédéric Robert-Nicoud

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Abstract

This paper takes a new look at the issue of overseas sourcing of services. In framework in whichcomparative advantage is endogenous to agglomeration economies and factor mobility, thefragmentation of production made possible by the new communication technologies and lowtransportation costs allow global firms (multinational corporations or individual firms active in globalnetworks) to simultaneously reap the benefit of agglomeration economies in OECD countries and oflow wages prevailing in countries with an ever better educated labour force like India. Thus, thereduction of employment in some routine tasks in rich countries in a general equilibrium helps sustainand reinforces employment in the core competencies in such countries. That is, the loss of some jobspermits to retain the 'core competencies' in the 'core countries'. The welfare implications of thisanalysis are shown to be not as straightforward as in a neoclassical world.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0734.

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Date of creation: Jul 2006
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Handle: RePEc:cep:cepdps:dp0734

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Related research
Keywords: Outsourcing wage inequality communication costs

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Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Miren Lafourcade & Jacques-François Thisse, 2008. "New economic geography: A guide to transport analysis," PSE Working Papers 2008-02, PSE (Ecole normale supérieure). [Downloadable!]
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