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Off-Shoring of Business Services and Deindustrialization: Threat or Opportunity - and for Whom?

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Robert-Nicoud, Frédéric

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Abstract

This paper takes a new look at the issue of overseas sourcing of services. In framework in which comparative advantage is endogenous to agglomeration economies and factor mobility, the fragmentation of production made possible by the new communication technologies and low transportation costs allow global firms (multinational corporations or individual firms active in global networks) to simultaneously reap the benefit of agglomeration economies in OECD countries and of low wages prevailing in countries with an ever better educated labour force like India. Thus, the reduction of employment in some routine tasks in rich countries in a general equilibrium helps sustain and reinforces employment in the core competencies in such countries. That is, the loss of some jobs permits to retain the 'core competencies' in the 'core countries'. The welfare implications of this analysis are shown to be not as straightforward as in a neoclassical world.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5617.

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Date of creation: Apr 2006
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Handle: RePEc:cpr:ceprdp:5617

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Related research
Keywords: communication costs; outsourcing; wage inequality;

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Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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(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. Miren Lafourcade & Jacques-François Thisse, 2008. "New economic geography: A guide to transport analysis," PSE Working Papers 2008-02, PSE (Ecole normale supérieure). [Downloadable!]
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