Offshoring: General Equilibrium Effects on Wages, Production and Trade
AbstractA simple model of offshoring, which depicts offshoring as ‘shadow migration,’ permits straightforward derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems, so econometricians who ignore offshoring might reject the Heckscher-Ohlin theorem when a properly specified version held in the data. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations, and to allow for monopolistic competition.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6218.
Date of creation: Apr 2007
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Offshoring: General Equilibrium Effects on Wages, Production and Trade," CEP Discussion Papers dp0794, Centre for Economic Performance, LSE.
- Richard Baldwin & Frédéric Robert-Nicoud, 2008. "Offshoring: General Equilibrium Effects on Wages, Production and Trade," Development Working Papers 250, Centro Studi Luca d\'Agliano, University of Milano.
- Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Offshoring: general equilibrium effects on wages, production and trade," LSE Research Online Documents on Economics 19720, London School of Economics and Political Science, LSE Library.
- Richard Baldwin & Frederic Robert-Nicoud, 2007. "Offshoring: General Equilibrium Effects on Wages, Production and Trade," NBER Working Papers 12991, National Bureau of Economic Research, Inc.
- 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; Fragmentation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-28 (All new papers)
- NEP-BEC-2007-04-28 (Business Economics)
- NEP-INT-2007-04-28 (International Trade)
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.:
- Mitsuyo Ando & Fukunari Kimura, 2005.
"The Formation of International Production and Distribution Networks in East Asia,"
in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216
National Bureau of Economic Research, Inc.
- Mitsuyo Ando & Fukinari Kimura, 2003. "The Formation of International Production and Distribution Networks in East Asia," NBER Working Papers 10167, National Bureau of Economic Research, Inc.
- Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages C166-C185, 03.
- Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
- Ronald W. Jones & Ronald Findlay, 2001. "Input Trade and the Location of Production," American Economic Review, American Economic Association, vol. 91(2), pages 29-33, May.
- Avinash K. Dixit & Gene M. Grossman, 1981.
"Trade and Protection with Multistage Production,"
NBER Working Papers
0794, National Bureau of Economic Research, Inc.
- Woodland, A D, 1977. "Joint Outputs, Intermediate Inputs and International Trade Theory," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(3), pages 517-33, October.
- Jones, R.W. & Marjit, S., 1992. "International Trade and Endogenous Production Structures," RCER Working Papers 312, University of Rochester - Center for Economic Research (RCER).
- James Markusen, 2005.
"Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI,"
NBER Working Papers
11827, National Bureau of Economic Research, Inc.
- Markusen, James R., 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," CEPR Discussion Papers 5408, C.E.P.R. Discussion Papers.
- Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
- Mary Amiti & Shang-Jin Wei, 2005.
"Fear of service outsourcing: is it justified?,"
CEPR & CES & MSH, vol. 20(42), pages 308-347, 04.
- Diego Puga & Anthony J. Venables, 1996.
"The spread of industry: spatial agglomeration in economic development,"
LSE Research Online Documents on Economics
20683, London School of Economics and Political Science, LSE Library.
- Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 440-464, December.
- Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEPR Discussion Papers 1354, C.E.P.R. Discussion Papers.
- Diego Puga, 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEP Discussion Papers dp0279, Centre for Economic Performance, LSE.
- Batra, Raveendra N & Casas, Francisco R, 1973. "Intermediate Products and the Pure Theory of International Trade: A Neo-Heckscher-Ohlin Framework," American Economic Review, American Economic Association, vol. 63(3), pages 297-311, June.
- Feenstra, Robert C & Hanson, Gordon H, 1996.
"Globalization, Outsourcing, and Wage Inequality,"
American Economic Review,
American Economic Association, vol. 86(2), pages 240-45, May.
- Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
- Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001.
"The nature and growth of vertical specialization in world trade,"
Journal of International Economics,
Elsevier, vol. 54(1), pages 75-96, June.
- David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
- Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
- 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.
- Ronald W. Jones, 2000. "A Framework for Fragmentation," Tinbergen Institute Discussion Papers 00-056/2, Tinbergen Institute.
- repec:rus:hseeco:123689 is not listed on IDEAS
- Findlay, Ronald & Jones, Ronald, 2000. "Factor bias and technical progress," Economics Letters, Elsevier, vol. 68(3), pages 303-308, September.
- Francois, Joseph F, 1990. "Producer Services, Scale, and the Division of Labor," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 715-29, October.
- Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
- Ng, Francis & Yeats, Alexander, 2003. "Major trade trends in East Asia : what are their implications for regional cooperation and growth," Policy Research Working Paper Series 3084, The World Bank.
- Joseph F. Francois, 1990. "Trade in Producer Services and Returns Due to Specialization under Monopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 109-24, February.
- Wilhelm Kohler, 2004. "Aspects of International Fragmentation," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 793-816, November.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.