Offshoring along the Production Chain
AbstractRecent contributions on offshoring often assume that firms can freely split their production process into separate steps which can be ranked according to the cost savings from producing abroad. We replace this assumption by the notion of a technologically determined sequence of production steps. In our model, cost savings from offshoring fluctuate along the production chain, and moving unfinished goods across borders causes transport costs. We show that, in such a setting, firms may refrain from offshoring even if relocating individual steps would be advantageous. Conversely, small variations in model parameters may lead to a large increase in offshoring activities.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2564.
Date of creation: 2009
Date of revision:
offshoring; international trade; vertical production chain;
Other versions of this item:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F10 - International Economics - - Trade - - - General
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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