Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring

This file is part of IDEAS, which uses RePEc data

Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring

Author Info

Gianmarco I.P. Ottaviano (Bocconi University, FEEM and CEPR)
Alireza Naghavi (Università di Bologna)

Additional information is available for the following registered author(s):

Alireza Naghavi

Abstract

We develop an endogenous growth model to study the long run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm’s production chain between a home upstream division and a foreign downstream one. On the positive side, we show that, when contracts are incomplete, the possibility of offshoring has favorable implications for economic growth. Yet, offshoring induced by a higher bargaining power of the upstream division can hamper growth: while there is always a positive correlation between upstream bargaining weight and offshoring activities, there is a non-monotonic relationship between these and growth. Whether offshoring with incomplete contracts also increases consumption depends on firm heterogeneity. On the normative side, we show that, whereas with complete contract efficiency is restored through a subsidy to R&D only, with incomplete contracts a production subsidy to offshored upstream divisions is needed too.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.

Publisher Info
Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.54.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:fem:femwpa:2009.54

Contact details of provider:
Postal: Corso Magenta, 63 - 20123 Milan
Phone: 0039-2-52036934
Fax: 0039-2-52036946
Email:
Web page: http://www.feem.it/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (barbara racah).

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-07-28 (All new papers)
NEP-BEC-2009-07-28 (Business Economics)
NEP-CTA-2009-07-28 (Contract Theory & Applications)

Statistics

Access and download statistics

Did you know? The RePEc project started in 1997. Its precursor, NetEc, dates back to 1993.

This page was last updated on 2009-11-6.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.