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Globalisation and the evolution of the supply chain: who gains and who loses?

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  • FUJITA, Masahisa
  • THISSE, Jacques-François

Abstract

This paper focuses on two distint facets of globalization: the decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities within firms. When the unskilled have about the same wage in the two regions, the decrease of these costs fosters the gradual agglomeration of plants in the core region accommodating the headquarters. By contrast, when the wage gap is significant, the process of integration eventually trigers the re-location of plants into the periphery. In particular, when the preocess of re-location is driven by falling communication costs, the welfare of all workers living in the core goes down whereas the welfare of those who reside in the periphery rises.

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File URL: http://dx.doi.org/10.1111/j.1468-2354.2006.00397.x
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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1968.

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Handle: RePEc:cor:louvrp:-1968

Note: In : International Economic Review, 47(3), 811-836, 2006
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  1. Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers.
  2. Gilles Duranton & Diego Puga, 2000. "Nursery cities: urban diversity, process innovation and the life-cycle of products," LSE Research Online Documents on Economics 20204, London School of Economics and Political Science, LSE Library.
  3. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  4. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
  5. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  6. J Vernon Henderson & James Davis, 2004. "The Agglomeration of Headquarters," Working Papers 04-02, Center for Economic Studies, U.S. Census Bureau.
  7. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc.
  8. Masahisa Fujita & Jacques-François Thisse, 2003. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 121-145.
  9. Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan, vol. 32(4), pages 641-665, December.
  10. Deardorff, Alan V., 2001. "Fragmentation in simple trade models," The North American Journal of Economics and Finance, Elsevier, vol. 12(2), pages 121-137, July.
  11. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  12. Thomas, Douglas J. & Griffin, Paul M., 1996. "Coordinated supply chain management," European Journal of Operational Research, Elsevier, vol. 94(1), pages 1-15, October.
  13. repec:cup:cbooks:9780521801386 is not listed on IDEAS
  14. repec:cup:cbooks:9780521805247 is not listed on IDEAS
  15. repec:fth:iniesr:430 is not listed on IDEAS
  16. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
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