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Globalization 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 distinct 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 triggers the relocation of plants into the periphery. In particular, when falling communication costs drives the process of relocation, 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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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4152.

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Date of creation: Dec 2003
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Handle: RePEc:cpr:ceprdp:4152

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Keywords: agglomeration; communication costs; headquarters; information technologies; plants; relocation; supply chain;

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References

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  1. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9780521171960, April.
  2. Gilles Duranton & Diego Puga, 2000. "Nursery Cities: Urban Diversity, Process Innovation and the Life-Cycle of Products," CEP Discussion Papers dp0445, Centre for Economic Performance, LSE.
  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.
  4. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
  5. J Vernon Henderson & James Davis, 2004. "The Agglomeration of Headquarters," Working Papers 04-02, Center for Economic Studies, U.S. Census Bureau.
  6. repec:cup:cbooks:9780521801386 is not listed on IDEAS
  7. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Papers 98-11, Michigan - Center for Research on Economic & Social Theory.
  8. 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.
  9. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  10. repec:fth:iniesr:430 is not listed on IDEAS
  11. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers.
  12. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  13. repec:cup:cbooks:9780521805247 is not listed on IDEAS
  14. 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.
  15. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  16. Thomas, Douglas J. & Griffin, Paul M., 1996. "Coordinated supply chain management," European Journal of Operational Research, Elsevier, vol. 94(1), pages 1-15, October.
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