We study the determinants of the location of sub-contracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs, and the nature of the contracting environment in each country.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
3165.
Grossman, G.M. & Helpman, E., 2002.
"Outsourcing in a Global Economy,"
Papers
218, Princeton, Woodrow Wilson School - Public and International Affairs.
Gene M. Grossman & Elhanan Helpman, 2002.
"Outsourcing in a Global Economy,"
Working Papers
149, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
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Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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