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Fragmentation, Outsourcing and the Service Sector

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Author Info
Ngo Van Long ()
Ray Riezman
Antoine Soubeyran

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Abstract

We show that the growth of the service sector facilitates outsourcing, or fragmentation of production. Services link production blocks, and allows the breaking up of integrated production. The cost of aggregate service decreases as the number of specialized services increases. A country with a greater number of specialized services tends to export components that are service-intensive. When international trade in specialized services are permitted, the country with an advanced service sector will outsource most of the manufacturing activities. Thus free trade in specialized services tends to increase fragmentation. On the other hand, if there are high transport costs with a bias against complex specialized services, then free trade in specialized services may work against fragmentation.

On montre que la croissance du secteur des services facilite la fragmentation de la production. Les services relient les blocs de production et permettent la dispersion de la production intégrée. Un pays possédant un grand nombre de services spécialisés a tendance à exporter les pièces dont la production utilise intensément les services. Avec la libéralisation de l'échange des services, les pays possédant un secteur de services avancé tendent à impartir la fabrication des pièces. Par conséquent, la libéralisation du commerce augmente la fragmentation. Par contre, si les coûts de transport sont élevés pour les services les plus complexes, le libre échange des services spécialisés peut réduire la fragmentation.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2001s-43.

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Date of creation: 01 Jun 2001
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Handle: RePEc:cir:cirwor:2001s-43

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Related research
Keywords: Fragmentation; outsourcing; service sector; Fragmentation; impartition; secteur des services;

Find related papers by JEL classification:
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies

References listed on IDEAS
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. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Papers 98-11, Michigan - Center for Research on Economic & Social Theory.
    Other versions:
  2. Richard G. Harris, 1995. "Trade and Communication Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 46-75, November.
  3. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  4. Richard G. Harris, 1993. "Globalization, Trade, and Income," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 755-76, November. [Downloadable!] (restricted)
  5. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, vol. 86(5), pages 1266-78, December. [Downloadable!] (restricted)
    Other versions:
  6. Deardorff, Alan V, 2001. "International Provision of Trade Services, Trade, and Fragmentation," Review of International Economics, Blackwell Publishing, vol. 9(2), pages 233-48, May. [Downloadable!] (restricted)
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  7. repec:fth:michin:422 is not listed on IDEAS
  8. Raff, Horst & von der Ruhr, Marc, 2001. "Foreign Direct Investment in Producer Services: Theory and Empirical Evidence," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
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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. Kong Weng Ho & Hian Teck Hoon, 2003. "Service Links and Wage Inequality," Departmental Working Papers wp0301, National University of Singapore, Department of Economics. [Downloadable!]
  2. Nicholas C. S. Sim, 2004. "International production sharing and economic development: moving up the value-chain for a small-open economy," Applied Economics Letters, Taylor and Francis Journals, vol. 11(14), pages 885-889, November. [Downloadable!] (restricted)
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This page was last updated on 2009-11-20.


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